15 May Debt Collections: What to Prepare for your Lawyer
One of the more common problems that we assist our clients with is collecting debts — money that is owed to our clients by their customers.
You would you think this is a pretty straightforward operation, and for the most part, it is. We collect most of the information from our clients, send out a what I like to call “nasty gram.” That’s not to say the letter is mean by any means, but merely to say: “hey you owe our client some money. Please pay them what you owe, or we will have to take you to court.” To be honest, I hope we never have to go to court, but we will when necessary.
If you’re in a situation where you must collect a debt from a client, here are a few helpful things that you should provide your attorney in order to make the legal process as smooth as possible.
First, the amount of money that is owed. This is usually pretty straightforward. But, if you have a contract that allows for interest or late fees to accumulate, you need to provide your attorney with that information. We need to know if you have assessed any finance charges, and what that total is aside from the original debt owed.
Second, if this money is owed according to a contract, your lawyer will need to see that contract. The contract must be signed by all parties. Recently, we had cases where the contracts weren’t actually signed, thus no proof of the customer’s confirmation to pay for said goods/services. The customer may have hinted that they signed the contract, but often when it comes to things like collecting attorney’s fees or interest, not having that signed contract may negatively impact your rights. Thus, if you have a contract, make sure it gets signed by the client so you have evidence that they intend to be bound by that contract.
Third, it’s very helpful if we know what communications you have sent to your customer trying to collect this debt. We can use copies of emails, text messages, letters that you have sent. It’s not that we are going to include all of that in our letter, but it is helpful for us to be able to establish a timeline so that we can say: “Dear customer, company A, our client, has contacted you on seven different occasions to collect this debt.” In doing so, we are very specific and clear to express that this is an ongoing problem.
Finally, it is always very helpful to understand whether you are prepared to go to trial to collect this amount of money. This is the key point. If you’re not willing to go to court to collect the money, then the lawyer must be careful in how the letter gets worded.
It is important to communicate with your attorney what your overall goal is.
The other situation that is helpful but not required is whether your attorney is authorized to accept a deal and what that deal could look like. If we receive a settlement offer from a customer, lawyers are obligated by our ethical duties to relay that offer to our client for their approval. Sometimes it is helpful if you say to your lawyer what type of settlement you would be willing to accept. For example, it could be 85 cents on every dollar, or a set payment plan. Having that flexibility allows the lawyer to respond quickly to a customer’s inquiries about a deal. However, if we receive an offer we always communicate that offer to our client before responding to the customer owing money.
When you’re dealing with collections, people usually have a good faith desire to pay their debts. Sometimes they get behind for a variety of reasons, and it is embarrassing. Maybe the cash flow is temporarily bad, or they had expenses they didn’t anticipate, and thus are embarrassed about the fact that they are behind. It is not intended to be a personal slight. If you treat your customers with respect and acknowledge the fact they had problems, you can generally avoid court.
To recap, when you are asking your lawyer to send out a collections letter, make your lawyer’s life easier — and your bill smaller — by providing them with some basic information about what has happened up until this point.