When to Engage an Attorney to Collect a Debt

Gurstel LogoToday’s guest blog was contributed by Lisa H. Haster, Esq., Of Counsel/Marketing Director for Gurstel Law Firm P.C. Over a series of 4 blogs, she’ll be walking our readers through the processes that can be expected before, during and after retaining a collections attorney to assist in recovery of delinquent accounts. The series will include:

  • When to engage an attorney and why
  • What obtaining a judgment really means for your business
  • The process a file undergoes when it is placed with a collections attorney
  • Recoveries that are available to a business once it obtains a judgment.

The longer you or your collection agency wait to send certain past due accounts to an attorney, the less likely the chances of recovery are! So why do you need to know that? The reason is simple: you want to get paid. Unless there is a real dispute regarding one certain account, when a customer is not current on one bill, it likely means that they are having difficulties paying other bills, as well.

When trying to collect on a past-due account, you want to be as far up the food chain as possible. You do this by hiring an attorney or allowing your collection agency to work with an attorney early, in order to obtain a judgment before other creditors have the chance to rise above you on the food chain. If you’re early enough to the party, there just might be something left to eat. If you’re the last one to show up, you can count on starving.

For example, Customer Biz fails to pay ABC Biz, and ABC Biz sits on the outstanding account trying to collect it internally, to no avail. Several years later, Customer Biz is defunct. Its owner has filed for bankruptcy, its bank accounts are closed, it has multiple judgments against it, and all of its equipment has been liquidated. Customer Biz no longer has any assets. Therefore, ABC Biz will never recover its receivables. However, if ABC Biz had sent the account to an attorney or to a collection agency specializing in commercial collections that has a record of knowing when it is wise to partner with an attorney, the likelihood of collecting on the account could have been much higher.

Agencies that include pairing creditors with attorneys as part of their debt collection strategy have a unique opportunity to influence creditors to send accounts their way. They can educate creditors as to when it could be important to fast-track files to legal placement, helping to ensure that delinquent customers pay creditors the money they are owed, and show statistics as to how that strategy has affected their collection track record.

Sending accounts to an attorney sooner is the first bit of information that will help you get your customers to hold up their end of the bargain and pay you for the services or products provided. Next week we’ll explain in detail what obtaining a judgment really means for your business, and what incentives are available to a judgment creditor that are not otherwise available without a judgment.

Lisa_Gurstel  by Lisa A. Haster, Esq.

Categories: Collection Attorney Profession, collection law settlements, Commercial collections, Creditors Rights Law Firms, Debt Collection, Guest Blogs, NL Insider, Outsourcing

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