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Kaplan Law Group, PLLC | Commercial & Real Estate Litigators
  • Home
  • Our team
    • Charles I. Kaplan
    • Baltasar D. Cruz
    • Alan Notinger
    • Mark D. Wigder
    • Nicholas Veach
    • Deana Watts
    • Fathima Mumith
    • Christine Cole-Biederman
  • Practice Areas
    • Business And Commercial Litigation
    • Business Transactions Law
    • Real Estate
    • Creditors’ Rights
    • Criminal Defense
  • Testimonials
  • Blog
  • Contact
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  5. I need to collect a business debt. What are the steps?

I need to collect a business debt. What are the steps?

On Behalf of Kaplan Law Group, PLLC | Aug 6, 2020 | Business Collections |

These days, every business needs to collect on every debt it can. When it comes to collecting business-to-business debts, you may need all the help you can get.

The basic steps in business debt collection include 1) demanding payment, 2) getting a lien and 3) enforcing the lien. You can and should try demanding payment on your own before you bring in an attorney to pursue the debt. However, you may get further when the demand comes from an attorney.

Contact your debtor. This can be done informally by phone or email, or you can send a reminder for payment. Many times, people do pay their debts when reminded of them.

Send a demand letter. This should inform your debtor that you are trying to collect a debt and contain the particulars of the debt obligation. It should also give the debtor a chance to respond by denying the debt, for example, or by offering an alternative solution. Send the letter by certified mail or via a delivery service that requires a signature for delivery.

Do you already have a lien? Some commercial enterprises have the power to put liens on certain property. For example, mechanics, artisans and materialmen can place a mechanic’s or materialmen’s lien on property they have worked on, if they have provided labor or materials. If you have this power, your attorney can move on to the step of enforcing the lien.

If not, a lawsuit may be required. When a business owes you money and won’t pay after reasonable demands are made, you may need to file a lawsuit. Alternatively, you could file a case in arbitration. In either case, the court will determine if your contract was valid, whether it was breached, and what the remedy for that breach should be. In most cases, you will receive a monetary judgment. This can be used to obtain a lien against your debtor’s property.

Keep the door open for settlement. Even in the midst of litigation or arbitration, your debtor may be willing to pay up. Make sure they know you’re interested in settlement.

Enforce your lien. The final step in collecting a commercial debt is to enforce your lien. One way to do this is to force the sale of your debtor’s real property. This is generally done by getting an abstract of judgment and serving a writ of execution through the county sheriff. The sheriff will then levy (take possession of) the real estate and, if your debtor still won’t pay, sell it and give you the amount you are owed. You may also be able to levy other property, such as the debtor’s accounts receivable, until the debt is paid off.

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