Commercial collections can be a confusing process for a business owner. In this post, you’re going to learn the answers to the 5 most frequently asked commercial collections questions. This post is not meant as legal advice. In fact, we aren’t addressing any legal scenarios here. This is because each commercial collections case is unique and has its own facts as well as potential legal solutions. To learn more about your legal rights, speak with an experienced attorney who focuses their practice on commercial collections.
What Is the Difference Between Commercial Collections and Consumer Collections in Business?
As a business, you may provide your services or products to other businesses or to consumers. When a business doesn’t pay you for the goods or services that you have provided, they enter the collections process. It is known as commercial collections. There are specific laws related to commercial collections. When a private citizen (as in someone who is not buying for a business) does not pay for goods or services that you provide, the process then becomes consumer collections. There are specific federal laws that relate to consumer collections that are very protective of consumer rights.
Will the Commercial Collections Process Work on Every Outstanding Debt?
Sometimes, the answer is no. There are many factors that must be considered when attempting to collect a judgment. The factors include the age of the debt (as it may be outside of the legal collections period), how accurate your record is for the debt, whether the past due business is still operating, whether the business has unencumbered assets, whether the business is involved in litigation or in bankruptcy, and whether there are unsatisfied judgments that already exist against that business. Speak to a knowledgeable business attorney about how you can stay a step ahead of the collections process.
Can You Ever Collect a Commercial Debt Against an Individual?
Not surprisingly, the answer is ‘maybe’. It depends on how the business is structured. When a commercial entity is legally structured in certain ways, they may receive certain personal liability protections in regard to business operations (including business debt). To ensure your best chances at collecting, you would need to speak with a licensed attorney who focuses on commercial collections to talk about your specific past due accounts. If your client signed a personal liability guaranty at the beginning of the relationship, you may have more legal standing to collect. Again, though, you would want to speak with a licensed attorney in your state.
What’s the Difference Between a Collections Agency and a Commercial Collections Attorney?
Briefly, a collections agency has limited tools that they can use to collect on commercial debt. Indeed, collections agencies are limited by law in what they can and cannot do. Many rely on employees who may not fully understand commercial collections law (yikes!). If a representative from a collections agency breaks the law, you could be potentially be facing a lawsuit. A commercial collections attorney understands the associated laws and has more tools to help you get paid. And you want to get paid, right?
If you are not being paid because of a contract dispute, a collection agency will probably not be of much help to you. They can only reiterate to the debtor that it owes a certain amount of money. Meanwhile, an experienced attorney can better respond to contract issues while also focusing on obtaining as much payment as possible. If your issue needs to move forward in court, your same attorney can represent you.
Do I Really Need to Worry about Commercial Collections?
The short answer is yes. It happens to all businesses at some point. Past due accounts affect your profitability. It could cause you to be denied a business loan and have other negative effects on your business.
For more information or to discuss collecting a judgment owed to your business, contact Los Angeles commercial collections attorney Ronald P. Slates today.
