Doing business in New Jersey requires engaging in a variety of financial transactions with other businesses. When another company owes you money and has not paid, it may be time to pursue a commercial collections action. Our firm can help your business to recover unpaid debts from other businesses.
How we can help your business with collections
If your business is facing a significant amount of accounts receivable, it is time to let a New Jersey collections attorney work to get you paid. It is hard for a business to stay profitable when don’t receive prompt payment for all goods sold or services rendered.
Only two ways exist of getting a borrower or debtor to pay your money: voluntarily and involuntarily. We are successful in using both methods. We use persuasive measures to make debtors understand that making a voluntary payment is better for them. In addition, we explain the binding effects of a contract. We also explain the various remedies that we legally can seek if we take the matter to court. If negotiations do not work, we have an arsenal of legal methods we use to seek payment through involuntary legal measures. Unlike collection agencies, a commercial collection lawyer can take all the steps necessary to collect accounts receivable.
What is the legal process of collecting from another business?
If your clients or borrowers are businesses, it is important continually to look for signs that they may be having financial difficulties. As soon as payments are being made late or for less than the full amount, you should begin open communication with them. Many times, if you discover the problem early enough, we can help you design creative methods for receiving payment without digging yourself into deeper debt. However, at times it may become necessary to file a loan collection lawsuit against another business. In that case, we are prepared to walk you through each step of the process, including:
- Sending a demand letter that lets the borrower know you’re pursuing legal remedies if you don’t receive payment
- Filing a lawsuit
- Investigating the borrower’s reasons for not paying by filing motions and conducting discovery
- Obtaining a judgment in your favor (if the customer does not have a valid defense)
- Taking steps to enforce your judgment and collecting the amounts owed to you through legal collection tools, such as garnishments, liens against real property and asset seizures
Legal tactics for leveraging debtors into payment
Lenders have a number of tools at their disposal to force a delinquent company to pay a debt. But first you must receive a judgment against that company and this requires that you file a lawsuit against the debtor company and win. On the other hand, there are fewer restrictions on commercial debt collection tactics than there are on consumer debts.
In consumer cases, collection methods are limited by the Fair Debt Collections Practices Act. This is not the case when it comes to commercial debts. This allows your attorney to use a wider array of investigative tactics in order to recover the debt.
But the process won’t get any easier once you’ve received the judgment. Indeed, it easier to get a judgment against the other company than it is to collect on the debt that they owe. But there are plenty of means to force the delinquent creditor to pay off their debts. These are described below.
B2B Debt Recovery Litigation
In cases where you have not been successful using the threat of litigation to recover a debt, more aggressive means will be necessary. The debtor company has one of three options. They can either settle the debt immediately, ignore the lawsuit, or fight it in court.
In the case where they ignore the lawsuit, a default judgment will be filed against them. In other words, the court will hold them liable for the debt.
If the debtor fights the action in court, you attorney will help you prepare the case against them. This includes providing the court with signed contracts, canceled checks, purchase orders, invoices, and account statements. In most cases, when all this information is provided, the court will rule in the creditor’s favor. In some cases, the debtor will argue that the services were not provided in accord with the contract. You and your attorney will need to show that the contract was satisfied according to the terms.
After getting the judgment, you must have the judgment docketed. In New Jersey, a docketed judgment will remain valid for 20 years. The judgment can also be renewed in 20-year intervals.
B2B Judgment Liens
Once the court has issued a judgment against the debtor company, they now become a judgment debtor. This allows you, as the judgment creditor, to initiate certain actions against the judgment debtor. One of the most powerful is the judgment lien.
You can attach judgment liens to any real estate owned by the business. Essentially, this allows the creditor to turn an unsecured debt into a secured debt. These are typically paid off when the real estate is sold.
B2B Bank Levies
Another common tactic is a bank levy. In this case, our attorneys petition the court to freeze the debtor company’s bank accounts. You can only freeze the amount of your judgment, but it forces the debtor company to turn over the funds or negotiate a repayment plan.
Bankruptcy and creditors’ rights
If a judgment debtor attempts to file for bankruptcy you have some options still available to you. Businesses may only file for Chapter 7 or Chapter 11; they cannot file for Chapter 13. In many cases, delinquent creditors will use bankruptcy’s “automatic stay” in order to delay a judgment creditor from pursuing legal actions against them.
In cases where the judgment debtor files for Chapter 7, the entire business will be liquidated in the process of repaying the debts owed. While this is an option, businesses that want to continue operations will need to file for Chapter 11.
Chapter 7 and Businesses
Chapter 7 essentially dissolves the business. Once the business is dissolved, a discharge of the debts is no longer required. All the property that the business has left will be set into a trust by the bankruptcy trustee. The trustee will then create a hierarchy of debts owed. Typically, the U.S. Government gets first dibs for any unpaid taxes. Companies that file for Chapter 7 cannot protect assets in the same way that creditors can. For that reason, forcing a company into Chapter 7 can be a good way to recover some of your debt. This, of course, depends on how much debt is tied up in unpaid taxes or creditors that rank higher in accord with bankruptcy law.
In addition, despite the fact that the company has been liquidated, the debt still remains in place. This means that judgment creditor can pursue actions against individuals when it is appropriate to do so.
Chapter 11 and Businesses
Chapter 11 bankruptcy reorganizes the company’s debt into manageable payments. In this case, there are special provisions for “small business owners”. Some of these provisions require extra reporting while others provide certain advantages to small business owners. If a judgment debtor applies for Chapter 11, your commercial debt collection attorney can help advocate for a fair repayment plan.
Discuss your commercial collections case with an experienced New Jersey commercial collections attorney
Schedule your confidential initial consultation with Snellings Law LLC today. We provide flexible hours upon request, and our office has available parking and access to public transportation. Your business’s debt recovery is our top priority.
Have a question? Get in touch with us. We would be glad to hear from you.
By submitting this form, you understand and agree that we have not agreed to represent you in any matter and that no attorney-client relationship has been formed.