Do Not Ignore Your Outstanding Debts - Get Experienced Legal Help from Attorney Alan M. Cohen
In the world of debt collection litigation, the essence of the battle is control. At some point, some debtors either fail or neglect to pay. Some debtors do not pay because they are using you for creditor financing (using your money to purchase and pay for other materials from your competition).
Others do not pay because they simply want to spite you. Still others claim that they have no money. Fortunately, several statutes and court rules exist to help you collect from the Can Not Pays ("CANOPS") and the Will Not Pays ("WILLNOPS") of this world.
In your battle to regain control from your CANOPS and WILLNOPS, several weapons exist in your legal arsenal. These include, but are not limited to, bank attachments (discussed in Part One of this Newsletter), real estate attachments (discussed in Part Two), personal property attachments, keeper attachments and injunctions.
Ex Parte Bank Attachments
Success Story # 1: A doctor hires a lawyer to help him buy a high tech company. Although promising to pay the attorney's bill, the doctor makes only sporadic payments. Before long, the good doctor became Dr. Deadbeat to the tune of $80,000.00.
The Attorney hired attorney Cohen to collect his money. We immediately sued. The District Court allowed our ex parte motion to attach Dr. Deadbeat's bank account and real estate. Although the bank attachment only caught a few hundred dollars, we attached Dr. Deadbeat's house that he owned with his wife as tenants by the entirety. Because of the tenancy by the entirety, we could attach, but could not sell the property.
One day after Dr. Deadbeat failed to file his answer within the time provided by court rules, we appeared in District Court and obtained a default and default judgment.
Knowing that we could not sell Dr. Deadbeat's house, we filed a Complaint on the Judgment in the Superior Court. We sought and obtained an injunction preventing Dr. Deadbeat from receiving any money from his practice. The Court ordered him to pay all monies that he received from any source directly into escrow.
Dr. Deadbeat now worked for the sole benefit of our client. Two months went by without receiving any of the court ordered payments. We scheduled the deposition of the person most knowledgeable about Dr. Deadbeat's practice - his former secretary.
She told attorney Cohen that Dr. Deadbeat had been putting monies that he received from his practice directly into his wife's account, violating the Court's order. The bank's records confirmed that he had put almost $15,000.00 into his wife's account.
Dr. Deadbeat filed for bankruptcy in a last ditch attempt to stiff his client. His tactics worked. Due to a little known provision of the Bankruptcy Code, the Bankruptcy Trustee could sell Dr. and Mrs. Deadbeat's home and apply Dr. Deadbeat's share to pay his creditors.
Trapped, Dr. Deadbeat's lawyer offered $10,000.00 now and another $10,000.00 paid over five years. We rejected the offer. Because of his aggressive negotiations, Dr. Deadbeat finally agreed to cough up almost $70,000.00 within 60 days, proving the old adage one can run but one can't hide!
Success Story #2: A general contractor is doing its job properly and timely. As the final payments draw near, the property owner decides to draw the purse strings tight. It refuses to pay the GC the final $200,000.00 although only a few thousand dollars worth of work is in dispute. The owner rebuffed the GC's many requests for payment of the undisputed amount and refused to sit down to attempt resolving the few remaining differences.
What would you do? The GC called me.
I sued and obtained, ex parte, a $224,000.00 attachment of the deadbeat's money. The owner realized that it wasn't in his best interest to litigate over the few thousand dollars. Facing possible double or treble damages, he caved in. Within a little more than sixty days, my client, the GC, received its $200,000.00.
Success Story #3: One of your biggest customers is going to stick you with a $70,000.00 debt and starts buying from your competitor. WHO ARE YOU GOING TO CALL? ATTORNEY ALAN M. COHEN LLC, THAT'S WHO!!!
Company X did. Within three business days, I filed suit and ex parte attachments were appropriately obtained. The day after the Deputy Sheriff served the bank attachments the deadbeat was in my office. It seems that the attachments caught over $70,000.00 and that this crimped the debtor's style. Within a few days, the debtor had given a security interest in all of its businesses, a mortgage on its principal's house, and a commitment to purchase more than $20,000.00 in new business. My client recovered all of the amounts due, including attorney's fees.
Success Story #4: A supplier is owed $340,000.00 from its once good customer. The customer, knowing that it was about to be sued, sued first - seeking over $400,00.00. The customer claimed that the supplier breached an alleged oral exclusive distribution agreement and made false promises that it relied upon. The supplier's first attorney stalled and crawled.
Based upon a referral from an existing client, the supplier jumped ship and retained our firm.
We immediately counterclaimed for the $340,000.00 and obtained an ex parte bank attachment. The attachment froze almost $200,000.00 of the customer's money.
Although the customer's counsel huffed and he puffed, he could not convince the Court to release the frozen funds. When the customer attempted to transfer the case to the Superior Court, we defeated the motion.
The next phase involved "discovery". After receiving excuse upon excuse, we sought and received a Court order that the customer be deposed. Faced with discovery motion after discovery motion, the customer finally offered $75,000.00. Offer Rejected!
When the customer tried to take discovery to support its promissory estoppel claims, we filed for a "protective order." The Court agreed and prevented the customer from taking any discovery until he could complete discovery on the merits of their case.
Faced with an uphill battle that it could not win, the customer started exploring whether we would be willing to mediate the case. After winning almost every discovery and procedural motion, we convinced the customer to offer at least $200,000.00 to induce our client to mediate the case.
After almost three hours of mediation, the customer offered to pay $300,000.00 over time. The offer was again rejected.
A few weeks before trial, the customer's counsel contacted us to see if they would accept $350,000.00. The answer was still no.
Facing very likely liability for alleged unfair and/or deceptive trade acts and after admitting in deposition that it owed the full principal amount, the customer faced the music and danced to the tune of Attorney Cohen's fiddle!
Because of our aggressive and persistent efforts, our client received $400,000.00 within 30 days of the settlement agreement and paid to the customer nothing on its complaint.
Bank Attachments
Unlike some other attachments, freezing your debtor's bank account so that they cannot use or withdraw "their" money usually has a sudden impact on the debtor. Even when the attachment does not catch any funds, it can bring the debtor to the table for meaningful settlement discussions.
I recommend making a copy of every check that you receive from your customers for three reasons:
- Accounting verification
- Indicates continuous banking changes (a red flag); and
- Affords the collection attorney attachment targets
Armed with knowledge of the debtor's last known bank, I often file a motion for a bank attachment. There are two ways to obtain a bank attachment - with notice and ex parte (without notice).
It is important to remember that attaching the money in a debtor's account does not automatically entitle you to that money. Rather, it is merely a form of gaining security-monies are held aside by the Bank to pay you after you have won the battle. Simply stated, the role of prejudgment security is to help ensure that after you have won the battle, you win the war and now control your own money.
The attachment of a debtor's personal property is in either a common law device to put a lien on a company's inventory, equipment, furniture, etc. The attachment gets posted at your debtor's place of business for all to see and is the recorded with the Office of the Secretary of State. When a business attempts to sell its assets, your attachment often will lead to payment.
There are two ways that one can obtain any attachment: (1) with notice to the defendant, and (2) without notice to the defendant ("ex parte").
Ex Parte Real Estate Attachments
Success Story #5: A local electrical contractor, who had always paid you suddenly develops a 6,000 volt financial short circuit. Company "A," after receiving an earlier edition of our Newsletter, calls us.
Upon investigation, we learned that the debtor had recently transferred his property into a trust. This is a trick often used to avoid creditors. Within a few days of receiving the case, we sued. Besides seeking and obtaining an ex parte attachment of the debtor's bank account, we also obtained an ex parte special attachment of the debtor's interest in that property. This stopped the debtor from selling or refinancing that property to our client's detriment.
Eureka! The bank attachment hit a "live wire" catching more than $5,500.00. Due to the two attachments, within 90 days after suit our client recovered the shocking sum of $8,000.00.
Example: Sometimes a good customer slowly becomes slow paying and eventually a non-paying deadbeat. Deciding when to turn an account over to collections is one of your hardest business decisions.
Company Y sold lumber to a customer for several months without experiencing any substantial collection problems. Slowly, the customer started developing "deadbeatitis". The customer made repeated promises of payment, even claiming at one time that its owner was out of the country in order to explain why it had failed to pay its bill. Company Y called attorney Cohen. Within two business days, we filed suit against the deadbeat customer and its various alter-egos. We obtained ex parte attachments on all of the customer's interests in real estate as well as freezing some money in the bank. The deadbeat was only days away from selling one of its properties. Prompt, aggressive and effective legal work resulted in our client's receiving all monies due it, together with attorneys fees, in a few weeks.
Success Story #6: An old customer has been stringing you along with promise after broken promise. The customer buys new materials from you on a COD basis. The old receivable hit the back burner. After more than five years of occasional COD purchases, the customer starts buying from your competitors and refuses to pay. Don't give up, our clients don't. Neither do we!
Our client contacted us with an almost six year old receivable in the principal amount of approximately $300,000.00. The debtor had offered $100,000.00 as payment in full which our client wisely rejected. We filed suit and we sought and obtained ex parte bank and real estate attachments. Although the real estate attachment missed and the bank attachment caught less than $20,000.00, the individual debtor had numerous properties he held on various trusts, LLC's and corporations in which we believed he had a beneficial interest. As a result of our persuasive negotiating skills, within twenty days after we filed suit, the debtor coughed up $300,000.00.
Success Story #7: Sometimes a good customer slowly becomes slow paying and eventually a non-paying deadbeat. Deciding when to turn an account over to collections is one of your hardest business decisions. Company Y faced this very issue.
When Company Y had had enough it called our firm. Within two business days, we filed Suit against the deadbeat customer and its various alter-egos. We obtained ex parte attachments on all of the customer's interests in real estate as well as freezing some money in the bank. The deadbeat was only days away from selling one of its properties. Our prompt aggressive and effective legal work resulted in our client's receiving all monies due it, together with attorney's fees, in a few weeks.
Generally courts are reluctant to issue ex parte attachments on real estate because fraudulent transfers of real estate are traceable and real estate is generally hard to sell.
However, a court may issue a real estate attachment if a sale is pending or a clear danger exists that if the defendant is notified in advance of the attachment, it will convey or conceal the asset. A court may also allow an attachment if an immediate danger exists that the defendant will damage or destroy the property.
As with all matters of discretion, different judges interpret the attachment standard differently. Some judges will not issue an ex parte attachment under any circumstances. Others will properly issue an ex parte attachment upon a demonstration that the debtor cannot be trusted not to take any action if notified in advance of an attachment motion.
Keeper Attachments
A Keeper Attachment allows the sheriff to take custody of personal property. It is most effective where the deadbeat is operating a cash business. The sheriff will seize all cash (not checks) as it comes into the debtor's business. Because of the impact it has on the operation of a business, courts allow Keeper Attachments on an ex parte basis less frequently than they do bank attachments.
It is important to remember that just because you obtained a Keeper Attachment, that does not automatically entitle you to keep the asset you secured. Like any other prejudgment security, it merely evens the playing field. Please contact us to schedule an appointment with one of our experienced attorneys.
Success Story #8: A retail company has been buying product from you. Suddenly you become concerned about this account. The customer is now a deadbeat. What are you going to do?
Company Y called our firm. We sued and obtained an ex parte keeper attachment on the deadbeat's business. As a result of the keeper attachment and our aggressive negotiations, our client received approximately $32,000.00 in less than one week. Within four months, the deadbeat filed bankruptcy. Without our prompt and aggressive response, the client would have seen only table scraps, if it was lucky.
Reach and Apply Injunctions
Control Your Money
Injunctions are used in reach and apply actions. In essence, the injunction requires a third party who owes a debtor money, to pay the company directly, thereby cutting the debtor out of the loop. However, obtaining an injunction is not easy. A court may require the company prove they have no other ability to receive payment from the debtor.
The story of Dr. Deadbeat also demonstrates the usefulness of reach and apply injunctions:
Success Story #9: A doctor hires a lawyer to help him buy a high tech company. Although promising to pay the attorney's bill, the doctor makes only sporadic payments. Before long, the good doctor became Dr. Deadbeat to the tune of $80,000.00.
The Attorney hired attorney Cohen to collect his money.
Knowing that we could not sell Dr. Deadbeat's house, we filed a Complaint on the judgment in the Superior Court. Attorney Cohen sought and obtained an injunction preventing Dr. Deadbeat from receiving any money from his practice. The Court ordered him to pay all monies that he received from any source directly into escrow.
Dr. Deadbeat now worked for the sole benefit of our client. Two months went by without receiving any of the court ordered payments. Attorney Cohen scheduled the deposition of the person most knowledgeable about Dr. Deadbeat's practice - his former secretary. She told attorney Cohen that Dr. Deadbeat had been putting monies that he received from his practice directly into his wife's account, violating the Court's order. The bank's records confirmed that he had put almost $15,000.00 into his wife's account.
Trapped, Dr. Deadbeat's lawyer offered $10,000.00 now and another $10,000.00 paid over five years. Attorney Cohen rejected the offer. Because of attorney Cohen's aggressive negotiations, Dr. Deadbeat finally agreed to cough up almost $70,000.00 within 60 days, proving the old adage one can run but one can't hide!
Special Real Estate Attachments
A little known statute allows attachments of a person's ownership interest in property in another person's name. I am aware of this statute and use it where appropriate to collect my client's money.
Success Story #10: Your corporate customer closed its doors and the guarantor does not appear to have any assets. You could simply write it off and forget it. Don't do it! Fight for your money! Company Y did - It hired us.
Our initial investigation showed that within the past four years, the guarantor put his house into a "nominee trust." Recognizing elements of a fraudulent conveyance, we filed suit and obtained a real estate attachment both against the individual guarantor and his ownership interest in the "nominee trust." The Court set aside the fraudulent conveyance and entered judgment against the deadbeat guarantor and his defunct corporation. We directed the deputy sheriff to levy and suspend the sale of the deadbeat's property and then waited. The deadbeat guarantor eventually sought to refinance. When he did - "gotcha" - to the tune of $7,000.
Personal Property Attachments
The attachment of a debtor's personal property is an effect a common law device to put a lien on a company's equipment, furniture, etc. The attachment gets posted at your debtor's place of business for all to see and is recorded with the Office of Secretary of State. When a business attempts to sell its assets, they must deal with you.
Success Story #11: A commercial property owner, after paying all of Company "B's" requisitions, develops deadbeatitis on the fabled "last payment" for almost $6,000.00. Company "B" called us.
We appeared ex parte and obtained a bank attachment and personal property attachment. The Deputy Sheriff, armed with the personal property attachment convinced the debtor that calling us would be in its best interest. "How do I get rid of this sheriff," the debtor asked? "You could pay the bill," we suggested. The debtor said that it would pay the full amount due and owing the next day.
We told the debtor that we would ask the sheriff to leave but would send him back in two days if we did not receive payment.
Revived by the gospel of actually paying for what you receive, the debtor paid the full amount due and owing, including interest, costs and the sheriff's bill.
Sometimes, all that is necessary to obtain payment is a visit by your friendly neighborhood deputy sheriff armed with a writ of attachment authorizing seizure of personal property.
Success Story #12: Your customer owes you big bucks, but when you call for payment, he stalls, crawls or simply ignores you. Classic signs of the dreaded disease of "deadbeatitis." When your customer finally meets with you, he claims that he will pay you in full out of the proceeds of a sale. Don't wait, seize the moment!
Company X said "carpe diem"! When confronted with all the invoices, its customer admitted that it owed $106,000.00 and claimed that Company X would get paid out of a pending sale. Once burned by prior broken promises, Company X seized the moment and hired me. I immediately sued and obtained an ex parte bank attachment and an attachment of personal property (bulk attachment). I requested and obtained a form of attachment that allowed the sheriff to make multiple attachments of the defendant's bank account. The attachments caught over $68,000.00. Not surprisingly, the deadbeat agreed to settle the matter now. Within nine weeks my client received $106,000.00.
Success Story #13: A general contractor is doing its job properly and timely. As the final payments draw near, the property owner decides to draw the purse strings tight. It refuses to pay the GC the final $200,000.00 although only a few thousand dollars worth of work is in dispute. The owner rebuffed the GC's many requests for payment of the undisputed amount and refused to sit down to attempt resolving the few remaining differences.
What would you do? The GC called our firm.
We sued and obtained, ex parte, a $224,000.00 attachment of the deadbeat's money. The owner realized that it wasn't in his best interest to litigate over the few thousand dollars. Facing possible double or treble damages, he caved in. Within a little more than sixty days, our client, the GC, received its $200,000.00.
The Law Offices of Alan M. Cohen LLC represents clients and sues debtors in Middlesex County, Boston, Bristol County, Suffolk County, Hampden County, Norfolk County, Plymouth County, Essex County, Worcester County, Barnstable County and throughout Massachusetts.
The information you obtain at this site is not, nor is it intended to be, legal advice. Nor shall contact through said site establish an attorney client relationship, absent a formal fee agreement. You should consult Attorney Alan M. Cohen for individual advice regarding your own situation.
