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7 Ways a Creditor’s Attorney Can Improve Business Collections


Companies should act promptly to collect overdue accounts receivable.  Your lawyer can help. Here’s how:

Move Fast.  Unpaid accounts should be pursued energetically.  A customer habitually over 90-days past due may be insolvent. Pay strict attention to deadlines.  A string of broken promises means that the debtor either cannot or will not pay. 

Update Your Standard Contract.  Before problems arise, review the standard company agreement.  Make sure the payment terms are crystal clear.  The agreement should have a dispute resolution provision that provides for collection of attorneys fees, court cost and expenses.  The venue provision should allow the creditor flexibility to initiate a lawsuit in either its home state or where the debtor is located.  Review whether there should be a choice of law provision.  Note that a binding arbitration clause can mean two actions to collect: first, an arbitration to obtain an award and second, a lawsuit to have the award confirmed as a judgment.


An Effective Phone Call.  The shortest distance between two parties is usually a phone call.  Often, a phone call from the creditor’s business attorney will result in payment or a payment plan.  Phone calls from attorneys are answered by management or ownership.  The unpaid receivable goes to the top of the pile, which usually means faster recovery of owed money.

The Right Pre-Lawsuit Letter.  Efficiency is also important: the right letter can be more effective than a lawsuit.  In one dispute over unpaid accounts receivables, this law firm sent two letters on behalf of a business creditor.  The first letter was a pointed demand for payment of $850,000.  The debtor failed to respond.  The second letter threatened attachment proceedings, a method of seizing assets before trial, in California Superior Court, yet invited a negotiated resolution.  The evidence in favor of attachment was strong, and the trial judge would likely have granted an attachment in the amount of $1 million, based on principal owed, interest until trial, and anticipated attorneys fees and costs. In the end, the debtor agreed to a payment plan, in full and with interest.

To Sue or Not to Sue.  A lawsuit should be filed after attempts at negotiation have failed.  Bills are sometimes not paid because of an honest, business misjudgment.  However, in other situations, the debtor’s ownership is siphoning money out rather than pay creditors.  A debtor who is not paying, or only paying small amounts, should be sued.  At that point the creditor is usually out of options.  The creditor needs to act before the debtor fails. 

Coaching From Your Attorney.  Often coaching from a business collection attorney will improve the collection process.  An experienced attorney can review the options and suggest the right approach, one that preserves all the creditor’s rights and remedies.  Keeping the lawyers on the sidelines helps avoids escalation into the legal arena. 


When to Compromise.  A creditor is entitled to be paid in full. Usually, the debtor has no counter-claim worth considering.  Sometimes, however, there is a fault in the initial contract or technical issue which makes collection uncertain.  On other occasions, there are bona-fide issues with performance.  A smart debtor obtains a compromise before litigation is filed.  As the creditor’s investment in the lawsuit increases, in both time and money, settlement becomes more difficult. 

Conclusion.  The timely collection of accounts receivable is one of the key factors to a successful business.  Like everything else in a company, uncollected receivables are on the margin.  Improving the bottom line makes everyone look good.

Nathan Wirtschafter, Esq. is a California business trial attorney.  His law practice encompasses a broad range of business matters, and he represents clients in state and federal courts, arbitration and mediation.  He can be reached at (818) 660-2518 and

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We specialize in collection of receivables and promissory notes.


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