Collecting on unpaid debt from another business is an important part of many small businesses in New York. Yet collecting on unpaid debt is no easy task. The best way to collect depends upon the type of debt, who owes the debt and applicable laws.
Below, we’ve answered a few common questions about collecting from a business entity, otherwise known as commercial collections. Please keep in mind that this is not legal advice for your circumstances. You can get more information about your own best course of action by speaking with an experienced collections attorney.
Does it matter if it is consumer or commercial debt?
There are significant differences when pursuing collections against a consumer and collecting against another business. For example, consumer collections are regulated by the Fair Debt Collection Practices Act. The FDCPA strictly regulates collection efforts against consumers. It does not, however, govern collections against business entities.
What is the difference between a collection agency and an attorney?
Many businesses go first to a collection agency. However, collection companies require you to turn your debt over to them. In addition, collection agencies cannot take certain legal actions, like suing the debtor. They tend to pursue collections only by making phone calls and writing letters.
What does commercial collections involve?
The first part of any collections action is to investigate the debtor’s assets and liabilities. There will also be initial collections efforts not involving the courts. If these are unsuccessful, the next step is to file a lawsuit.
A successful lawsuit to collect on business-to-business debt will give the lender a court judgment. The lawsuit can be resolved through a settlement, or before the investigation part of the lawsuit starts, if the lender has supporting documents and submits an affidavit.
Once the judgment is entered, several actions are available to enforce it. These include contempt of court orders, obtaining liens and garnishing wages.