Credit Applications - Part II

Don't let your old receivables get away without a fight. My clients don't.

FRAMINGHAM.........Business has been very good and you have not had the time to closely monitor accounts receivable. Upon review, you notice a five year old debt in the amount of $20,000.00 which you think is uncollectable. Don't give up.

Company X didn't. They called me. Within two business days after being retained, I filed suit and appropriately obtained an ex parte attachment. The first bank attachment caught a large sum of money. Upon further research, my client and I found a second bank to attach. Armed with this new information, I again went to court and obtained a second ex parte bank attachment. That caught even more money. Within thirty days, through aggressive legal tactics and negotiations, I obtained a satisfactory recovery of almost $20,000.00, which was more than the monies attached.

FRAMINGHAM.........Sometimes a customer just "disappears" owing you money.

Company Y had this very problem. Collection "efforts" by a collection agency had reached a dead end. The collection agency called me. I found that although the deadbeat owned no real estate, he was an officer in a corporation. I sued to reach and apply the deadbeat's interest in the corporation. I obtained a Temporary Injunction preventing the corporation from paying any money to the deadbeat until my client was paid. Because of my efforts, the debtor came to the table. Within sixty days, my client was paid. The collection agency gave up. I didn't.

Now this does not always happen, but it could happen for you. Armed with solid paperwork, an aggressive competent collection attorney who knows how to collect debts is a valuable ally in the battle for control of your money.

Part One of this series identified five items which should be included in an effective credit application (1) Name of Entity; (2) Type of Entity; (3) Address of Entity; (4) Whether Entity Owns or Rents; and (5) Name of Landlord. A good credit application should also seek more information, including, but not limited to, the following:

1. BANK ACCOUNT INFORMATION Every credit application should find out where a potential customer has its bank account(s) and the account number for each account. This allows you to check the truthfulness of your potential customer and paints a target for future bank attachment in case of a sudden outbreak of "deadbeatitis."
2. IDENTIFICATION OF PLAYERSIf the person signing the application is not a principal, you should ask why and seek proof that he or she is authorized to sign the credit application. If multiple principals exist, you should consider seeking multiple guarantors.
3. TAX IDENTIFICATION NUMBERTax identification numbers and social security numbers can help you determine the credit worthiness of a potential customer through various credit bureaus. It may also be helpful in the search for assets to attach if today's potential customer evolves into tomorrow's delinquent account.
4. LIST OF AUTHORIZED PERSONNELKnowing who is authorized to order your product or services and pick up or receive the order or services can save you hours of grief. It can also help reduce possible defenses to your collection action.

Inclusion of these items, along with others, including those referred to in the next issue of this Newsletter, may help you to sink your teeth into your customer before he takes a bite out of your bottom line.

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 do not pay because they are using you for debtor financing, (using your money to buy other materials from your competition).

Others do not pay because 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, real estate attachments, personal property attachments, keeper attachments, and injunctions.

Real Estate Attachments

There are two ways that you can obtain any attachment (1) with notice to the defendant, and (2) without notice to the defendant ("ex parte").

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.

However, just because you have obtained an attachment on the debtor's real estate, does not automatically entitle you to sell the property. Rather, it is merely a form of gaining security - an amount of the debtor's equity in his/her or its property is set aside 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.

Shouldn't you use an attorney that other attorneys rely upon to collect their delinquent debts?