How can you collect on your customers’ bad debts?

On Behalf of | Aug 30, 2019 | business & civil litigation

As a business owner, you’ve probably had your fair share of clients who have has failed to abide by their contracts with you. Customers often think that nothing will happen if they violate an agreement. They don’t realize that you were counting on them to meet your own financial objectives. If you’ve tried and failed at making collections calls, then there are a variety of legal remedies available to you to collect on the debts that you’re owed.

One option that you may consider is having a collection agency or an attorney attempt to collect the debt on your behalf.

Another option if the transaction was a secured one is to attempt to recover the car, boat or whatever collateral that your debtor used to secure their loan or that they purchased with funds that you lent them. You may be required to wait a certain amount of time after the customer defaults or otherwise violates the contract to initiate a repossession. That time frame varies depending on the jurisdiction that you reside in.

The next option for recovering a debt that you’re owed is to file a lawsuit. Two pre-judgment remedies that you may be able to pursue include an attachment or replevin. The former is much like a garnishment where a non-paying party can involuntarily have money withheld from their paycheck to satisfy a debt. The latter often involves the creditor maintaining possession of the deed to the property until all monies owed are repaid.

If neither an attachment nor a replevin is an option, then you can ask for a judge to enter in a final judgment in your favor. Once they do, you as the creditor can request the assistance of the sheriff’s department in recovering valuable debtor assets necessary to cover the debt that they owe you. If that’s not possible, then a lien can be placed on their property.

Judgment liens, which require a court order, and mechanic’s or materialman’s liens are the primary ways you can attach a debtor’s property. They can help you recoup the monies that you’re owed.

There are both North Carolina and federal guidelines that exist that creditors must follow when attempting to collect a debt. A business & civil litigation attorney in Statesville can advise you what those requirements are so that you don’t violate any laws when collecting debts from your customers.