Archive for the ‘Collections’ Category

Commercial Debt Collection – How Do I Collect When A Company Owes Me Money?

 businessman with financial symbols coming from hand

In today’s business culture we call businesses working with other businesses B2B. It has always been a popular practice to the alternative, business to consumer. The rules are different governing B2B as opposed to B2C. The legal and business world assume that the B2B relationship and players are more sophisticated.

This post discusses what happens when the B2B relationship sours and one company must collect what it is owed from another company. The most important distinction between the rules of B2B and B2C is that consumers are much more protected by government regulation. The Fair Debt Collection Practices Act protects the consumer, not businesses.

Phases of Collection

Most business think that when an account is overdue, then they call up a debt collection agency and the debt will be collected or its deemed bad debt. Businesses write off huge percentages of accounts receivable every year based off this flawed thinking.

There are at least two phases of debt collection, each of which could arguably be broken down into subcategories. You have a pre-debt fact gathering and document filing stage, as the first phase. Then there is the actual debt collection which can consist of many different options and this occurs after the debt is due. So more of a pre/post mindset.

Pre-Collection Phase – Getting Your Ducks In A Row

The pre-collection phase is often over looked and much more important than the post-collection phase. It is the foundation for the collection. This is the fact gathering and organizational portion.

This phase includes the initial fact gathering on the business. Your business should have an in-take sheet whereby it gathers all important information from the other business. Some of my clients even go as far as running credit checks on the business or getting personal guarantees from its senior members.

For contractors, suppliers and equipment lessors that I represent, this pre-collection phase is essential to keeping the accounts receivable low. This phase also includes sending out notices and filing liens, in a timely manner and properly. All of these essential elements make the post-collection process much easier, more efficient and most importantly successful. The old adage that I preach, is an ounce of prevention equals a pound of cure.

Finally another important aspect of the pre-collection phase is a well written contract between you company and your business client. This contract should have specific default and attorney fee provisions.

Collection Phase – It’s Time To Get Paid

Now your company has all of its intake information, gathered credit reports, personal guarantees, sent your notices, filed your liens, and have a well written contract, but your business client refuses to pay on its obligation to your company, what do you do?

There are a few options here and  only one good solution. Your business could write off the debt, it could try to collect internally, hire a debt collection agency or contact an attorney to collect. Obviously I’m biased here, but I do see this often. Writing off the debt is never good. Collecting internally can be okay but its slightly less successful than a debt collector. Attorneys can do all of the following steps which make the percentage chance of collection go up.

Your commercial debt collection attorney has a number of weapons at his disposal to collect on the outstanding debt. Many of them have time delays built in by law, which slows the process. First is to send a demand letter which includes the Louisiana Open Account Statue language. This is another avenue to get attorney fees and costs associated with the debt collection.

After the demand letter is sent out and thirty (30) days elapse, then its time to file suit against the debtor. Many businesses balk at this option because litigation can be costly and risky. Depending on the size of your debt, you attorney will likely take it on contingency which will minimize the litigation costs. From there your attorney will get a judgment, either by default or after trial.

Once the judgment is obtained, there are a number of possible means of collection. The attorney can examine the assets of the debtor, in a judgment debtor rule hearing whereby the debtor will be sworn-in and give testimony as to what the business owns. Further, the attorney can garnish banking and physical assets of the business. The judgment will be good for ten years and can thereafter be reinscribed. Once a judgment is granted collection chances go up.

Conclusion

In the end, some debts are simply bad and cannot be collected. Others, however may just be tricky or require persistence. Having a good commercial debt collection attorney at your side will greatly increase your collection rates and keep your accounts receivables low.

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Mediation! New Service Available at Wolfe Law

Seth J. Smiley, partner at Wolfe Law Group, LLC and author of ConstructionLawMonitor.com is now a formally trained mediator. New Orleans just hosted the AAAU’s (American Arbitration Association University), Essential Skills for the New Mediator workshop in downtown, hosted by Neil Carmichael.

Why would parties want to mediate a dispute instead of going to court? That answer is easy, yet has many factors. The most important are that mediation is less expensive and much more efficient compared to litigation. But the most important factor is that the parties control their own outcome, rather than a group of strangers (jury).

So if you are in a dispute and are looking for an economical, logical and swift conclusion that is mutually agreeable between you and your adversary, then mediation may be just what you are looking for. Contact the Wolfe Law Group, LLC for more details.

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Eviction – Get Out Of My Property!

Here in Louisiana as is the case in many states there is no “self-help” with regard to Landlords evicting an unworthy, lease breaching tenant. Evictions can be a prickly subject and even more difficult when you have a tenant who will simply not vacate the property. When it comes to commercial property and leases, there are very strict rules that must be followed in order to have a tenant kicked out.

Eviction proceedings are ones that are considered summary proceedings here in Louisiana. These are ones that can be conducted much faster than an ordinary proceeding. See La C.C.P. art. 2591. Unfortunately this is not always the case and the Judge may use his discretion to retard the progress of the action.

Depending on the type of lease that Landlord and Tenant will determine how the lease may be terminated and eviction proceeding started. Termination of a lease is governed by La C.C.P. art. 4701 et seq. A helpful aspect for a Landlord to put into his lease, is that La C.C.P. art. 4701 notice is waived, therefore the Landlord will be able to institute eviction proceedings immediately upon default or termination of the lease.

The law has specific definitions for all the parties involved with a lease and eviction. These definitions are spelled out in the code at La C.C.P. art 4704. Terms such as Lease, Lessee, Lessor, Occupant, Owner and Premises are literally spelled out by the code. This is helpful to determine who the parties are.

If the Landlord is awarded possession of the premises by a court, and the tenant does not remove itself from the premises, then a Warrant will be issued to have the sheriff remove the tenant from the premises. This is a very serious penalty. See La C.C.P. arts 4731 and 4733 for more on this procedure.

Landlord / Tenant relationships can be very frictional at times. Most of the time the parties get along and there are not issues. In the small majority of the time where there are disputes, the lease will control. Further, the eviction proceeding is where the parties will have their day in court. I have dealt with a number of lease disputes here recently, and none are easy by the time they get to me. Its important to have a good working lease and take into account the rules to get the tenant out.

Posted in:     Collections, Common Topics, Disputes, Litigation, Louisiana  /  Tags: , , , , , ,   /   Leave a comment

Sports and Construction – Lessons Learned

Growing up in South Louisiana, originally from Baton Rouge and now residing in New Orleans, I’ve had a really rough week being a sports fan. After LSU laid an egg in the BCS Championship game and the Saints came up seconds short in the NFL playoffs, I began to ponder, what can we learn from this? Being a construction law attorney, I wanted my clients and readers to learn form the mistakes and shortcomings of my favorite teams.

Some general themes we can take away from both losses are that the teams who are most prepared and execute the game plan the best will be the most successful. In both instances, LSU and the Saints did not execute and were not as prepared as their oppoinent. In the construciton world owners, general contractors, subcontractors and suppliers succeed when they are fully prepared for the project at hand and fully execute the company’s specific game plan for success.

IF LSU’s BCS PERFORMANCE WERE A CONTRACTOR IT WOULD NEVER GET PAID

LSU worked very hard all season to get into the big game. This paralles a budding company doing all it can to land that very promising bid for a substantial project. A contractor prepares for months and years to get that big once-in-a-lifetime project. When the big stage rolls around, the contractor needs to make sure, he/she does everything correctly so that they get paid and produce quality.

In LSU’s case this contractor would have not been successful in negotiating a quality contract that is mutually beneficial to each contracting party. They would not have filed all of the preliminary documents such as a notice of contract. This is a company that would have had numerous delays along the way, many of its own doing. During the course of the project this company would have not made any adjustments as the project went along continuing to further bury itself with no chance for success. When then end of the project rolled around, there would be no substantial competion filed, no adequate demand for payment, no lien filed or any other tool used to secure payment. This company would be last in line to get paid, and when its all said and done, the dream project would have been a disater, possibly putting this company in financial ruin. I encounter this type of company all the time and unfortunately, by time it gets to my desk, there is little or no hope of securing full and final payment.

IF THE SAINT’S PLAYOFF GAME WITH THE 49′ERS WERE A SUPPLIER IT WOULD FALL SHORT OF SUCCESS

The Saints on the otherhand had a game that played out just a bit differently. Had it not been for mistakes early on and poor late game defense, they too would have advanced and been in the NFC Championship game. This is analogous to many issues that suppliers have when trying to successfully obtain full payment at the conclusion of a job.

By the time I get a call from a supplier who is not being paid on a job, many of the typical right protection devices are no longer present due to the mistakes that suppliers have made early on. When supplies are delivered to a job, notice to the general contractor, hiring party and property owner need to be given to preserve lien rights. Also, suppliers need to make good practice of obtaining a personal guarantee from the contracting party. Further, suppliers need to set up an “open account” in the supply contract, which will statutorily preserve rights for attorney fees and costs. All of these precursor items can be set up in the begining and save a supplier lots of time, money, and stress at the end of a project.

When I finally get the call from the supplier to aid in collection efforts, we make a strong last minute charge to file a lien, send a demand letter asserting rights under open account, and file suit to protect these causes of action. Depending on the set of facts at that juncutre will determine our chances of success. In the case of the Saints, too many early mistakes and a shoddy prevent defense, led to their downfall. If this were a supplier then they would have gotten pennies on the dollar at best on this project, no matter the last minute heroic efforts.

WRAP UP

We need to look at the success and failures of others and learn from mistakes and good calls. There are lessons to be learned here. My teams will live to fight another day, but many companies do not. In these economic times an ounce of prevention is worth a pound of cure, to steal a medical analogy. Set up your game plan to do it right from the start and you will end up with success, unlike the teams noted above.

Posted in:     Collections, Construction Contracts, Construction News, Delays, Filing Requirements, Litigation, Louisiana  /  Tags: , , , , , , , , , ,   /   3 Comments

Tropical Storm Lee – Prepare for Insurance Claims

Contractors and property owners should be very knowledgable of the claims process after a natural disaster. Over the Labor Day weekend the New Orleans metro area, along with southern Louisiana experienced high winds and double-digit rainfall totals due to Tropical Storm Lee.

Contractors who have equipment, property and unfinished work need to report any flood, wind or wind driven rain damage to your general liability insurer in a timely fashion so that you may collect reimbursement for damages sustained from this storm. Your insurer will assign a claims specialist to assess the damage and this person is who you will work with to obtain reimbursement. Be sure to read the policy to make sure you follow all the specific guidelines, otherwise your insurer may use this against you as an excuse not to timely pay up on the claim.

Homeowners in south Louisiana should be well versed in the drill of making claims against your homeowners insurance. This, too is a situation whereby you must read the policy to make sure you follow the set guidelines and timely file a proof of loss. If the insurance company does not value your damage to a level where you are satisfied, then you may want to hire a public/private adjuster by searching the Louisiana Dept of Insurance – Public Adjusters search or reaching out to an reputable firm such as Louisiana Adjusters. The final step is to hire an attorney to escalate your claim.

Due to Hurricanes Katrina and Gustav, firms like the Wolfe Law Group have valuable experience with handling these matters. The mere hiring of an attorney will escalate your claim to another level within the insurance hierarchy and depending on your claim, it may render more effective results.

Remember that you typically have 60 days to file a satisfactory proof of loss and you have one year to file suit against the insurer, both from the date of the loss.  It is important to take photographs and video if possible before clean up to maintain evidence of your loss. Another important tip is to keep good records of invoices and receipts of all work performed on your repair. The insured (contractor or property owner) has a duty to mitigate its damages, so do what you can to prevent damage from getting worse once the storm has passed.

Remember to consult with an attorney or your insurance agent when reviewing the terms of your policy. The policy is the set of rules by which you and the insurer operate when making claims. Do not fight for your claim alone against your insurance company, hire an an attorney who can help you navigate the claim as well as the reconstruction of your property in an efficient manner. Whether you are a contractor or a property owner, contact Seth Smiley with the Wolfe Law Group to discuss your Tropical Storm Lee claims so that you get the results you deserve.

Posted in:     Collections, Construction News, Damages, Insurance, Litigation  /  Tags: , , , , , , , , , , , , , ,   /   1 Comment