Business Debt Collections

Large corporations have no trouble writing off debts or selling their unpaid bills to debt collection companies. It’s not so easy for small businesses. Every unpaid bill is money out of your pocket. To pay off your creditors, you need your customers and clients to pay their bills. When clients take too long to pay their debts, you may need to consider pursuing legal action.

Business debt collection laws limit what you can do to recover money from debtors. Before taking action, talk to a collections lawyer for legal advice.

What Should I Do if Someone Owes My Business Money?

Reaching out to the person who owes you is your first step in handling past-due bills and invoices. Together, you may be able to come up with a payment plan that gets them back on track to paying you in full. In some cases, you may be willing to accept a partial payment to resolve unpaid debt. But if you can’t come to an agreement, you have to take further action. 

Make sure you document your debt collection efforts. This documentation can help if you need to take your case to court or if the debtor reports you for debt collector violations. Collect any emails, receipts, invoices, and letters related to the matter. Start documenting when you have phone calls and what you discussed on those calls. 

If this progresses to the point of a lawsuit, you want to show that you did everything you could to recover before the courts had to get involved. You also want to prove you’re actually owed what you’re asking for. Once you have all the information you need, decide how you want to pursue collection.

What Laws Regulate Debt Collection?

There are limits to what creditors can do to collect debts. The Fair Debt Collection Practices Act (FDCPA) is the federal law that regulates what debt collectors and the original creditor can do when collecting unpaid debts. 

These laws developed in reaction to actions by commercial debt collection agencies that some thought went too far. Some limitations on collecting on outstanding debt include: 

• Only calling during reasonable hours between 8 a.m. and 9 p.m. 
• Not calling the debtor at their workplace if they request it
• Limiting contacting friends and family of debtors 
• Not contacting the debtor when they refer the case to their lawyer
• Using deceptive practices to pose as law enforcement or government agencies

Business owners may also be subject to state laws that restrict collection efforts. To find out about your local debt collection laws, contact a debt collection attorney. 

How To Get Money Back From a Business Debt

You have several options for trying to get some or all of the money you’re owed. It generally starts with writing a demand letter. If that doesn’t work, you can settle the debt. Alternatively, you can hire a debt collection agency or take the debtor to court. 

Write a Formal Letter

Send a formal demand letter. If you’ve never sent a debt collection demand letter, contact a business lawyer. They can draft a letter to the debtor outlining key contract terms and notifying them of possible litigation. Sometimes, just knowing that a lawsuit is on the horizon may be successful enough to inspire payments. Many debtors take a letter from a lawyer more seriously than one from the business. 

Settle for Less

You may want to take a partial loss to avoid litigation and still get something back. Some money may be better than no money. If there’s no way for the other party to pay you back in full, it may be worthwhile to accept at least some of what you’re owed. You can settle the debt for a lower amount. But make sure you put any agreement in writing and have it signed. 

Work With Professional Debt Collectors

You can hire a debt collection agency. These groups will take over trying to get the debt paid so you don’t have to. However, consumer debt collection agencies take a big chunk of what they recover as payment. Consider the amount it will cost when deciding to settle the debt directly with the customer or client. 

Take Them to Court

Your final option for recovery would be to file a lawsuit. If the debt is below a certain amount, you can handle the case yourself in small claims court. Small claims court is less expensive than civil litigation, and you can resolve disputes more quickly.

If you win in court, a judge will issue a judgment to collect the outstanding debt. However, even with a judgment, they may not want to pay. With an order of judgment, you can put a claim on money in their bank with a bank levy. You can also get a wage garnishment to claim money from their paycheck.  

How a Lawyer Can Help You Collect

Working with a debt collection legal professional can help you decide which course of action is right for you. Talk to a debt collection attorney about your legal options and how you can maximize your debt collection as a small business owner.