Debt Collection and Bankruptcy: Can You Still Get Paid?

Posted by Marilyn Miller on January 15, 2018  /   Posted in Uncategorized

Bankruptcy protections were created to give people who have incurred debts greater than their assets or ability to pay. It is intended to make way for a “fresh” debt-free start. However, there is nothing more frustrating to a small business owner than having to walk away from money owed to them when a customer declares bankruptcy.

There are several different kinds of bankruptcy. Generally they fall into two categories – those that discharge, or eliminate debts and those that restructure, or set up payment plans. There are also different types for individuals vs. business.

Once you are made aware that a customer (whether a company or an individual consumer) has filed for bankruptcy, you must not contact them directly as long as the case is active. If you have placed their file for collection agency, you must let them know immediately and they too, must cease contact directly with the debtor. No contact means no contact – no bills, no phone calls, no letters.  If the debtor is represented by an attorney, you may make contact with the attorney. You can also file a proof of claim with the court, and you will get notifications as the case progresses.

Your chances  of bad debt recovery depends on many factors, and there are some important things to keep in mind.

  1. If your customer is a business, do you have a personal guarantee, which means that the customer will personally guarantee debts of the company? If you do,  and the company declares bankruptcy, you may still have the right to pursue the personal guarantor.
  2. If you believe that there are assets that have not been disclosed, or believe for some reason that your debt should be exempted from discharge, you should attend the hearing, and you will have an opportunity to question the debtor.
  3. The debtor has responsibilities while in bankruptcy. If they do not perform their duties, their case may be dismissed. If so, you are free to pursue the debt again.
  4. If the debtor files a repayment plan for debts that is approved by the court, notify the court if the payments are not made according to the plan.
  5. If the debt is discharged, it means that the debt is wiped out, and you cannot recover it. Move on.

Things happen to people and businesses and you cannot foresee every situation, but if you are watching the aging of your receivables, look for signs of trouble and suspend credit, reach out to the debtor to see if you can work out a solution.

Contracts and Personal Guarantees: A Case Study

Posted by Marilyn Miller on January 12, 2018  /   Posted in Uncategorized

Contracts and personal guarantees make business debt collection infinitely easier. If you have no contract, you open yourself to an “them vs. us” dispute. Remember that anything in writing is better than nothing in writing, so if the best you can do is a quick email confirming payment terms and consequences for non-payment. The personal guarantee, which transfers the liability for business debts to an individual will be a great help if the business dissolves.

I recently received a file for collection which was in many ways a textbook case in the difference a contract and personal guarantee can make. Our client delivered a product that was billed to a business. The president of the company completed the credit application which included a personal guarantee.

The contract, also signed by the president allowed for a 7-day return. It clearly outlined when payment was due, and indicated the interest rate that would apply for past due invoices.

The buyers not only failed to pay for the product but returned it after 4 months. The company does not have assets in its name. Fortunately the president does, and because he signed the guarantee, we are able to pursue him personally.

What could have been a $3,000 loss became a recovery, because someone took the time to document.

A business owner once told me that he felt that getting a contract at the start of a new business relationship would set a negative tone. How could communicating all terms and conditions so that everyone understands them be a negative thing? Yet, I still receive calls weekly of people who fail to get a signed contract because “it is a rush job” or “we shook hands on the deal”

The days of the handshake deal are gone. You have the right to be paid, but you musy protect that right. Protect your business with a contract and a personal guarantee.

Your Maine Collection Agency: What They Can and Cannot Do

Posted by Marilyn Miller on January 11, 2018  /   Posted in Uncategorized

This post is not about the Fair Debt Collection Practices Act and the rights of consumers to be protected from abusive debt collection practices. Certainly, a debt collection agency must be in compliance with the law, but there have been many articles written on that subject. So, if you are reading this article looking for information on how to stop collection calls, stop reading now.

However, if you are a small Maine business owner or entrepreneur and you are not getting paid by customers, and want to hire a collection agency, this post will help you get a realistic idea of what you should and should not expect.



Here are some things your Maine collection agency  can (and should) do for you:

Help locate customers who have moved – A big part of debt collection is finding debtors and their assets. You should never pay an additional fee for research as it is an integral part of the collection process.

Give you ideas on how to improve your credit practices – The best collection is the one you can make in house without having to send to a third party.

Save your time and let you focus on your business while they focus on getting you paid – Certainly you should make an effort to recover money, but after a while it simply does not make sense to use productive time chasing bad debt. Also, debt collection agencies have special tools and training.

Advise you on information needed to assist with the collection and maximize results – Ask your collection agency to advise you on the process, and ask them to tell you what information they will need to get the job done.

Here are some things your collection agency cannot (and should not do):

Change the financial situation of your customers – If someone is in a cash crunch, you may not be able to get all your money at once, and you should be realistic and flexible with your agency if they ask you to accept small payments or a settlement. A good debt collector is a skilled negotiator, and they will work hard to get you paid, but you may have to be patient and be paid over time. Remember that most agencies are paid on a contingencybasis, which means they only get paid when they get results for you. So, if they ask you to take a settlement or payment plan, it is because their experience tells them it is best option.

Ruin someone’s credit – We get it. It makes you angry when you do not get paid. However, credit reporting is only one tool and recent changes in the law lessen the impact of single item anyway. So,  one item reported to the credit bureau will not ruin anything. Focus not on being angry but on the goal of getting paid.

Charge fees that are not in your contract or prohibited by law – If you want to recover collection costs or charge interest on past due accounts, you must have a customer contract that allows it. In addition, you must be in compliance with state laws. Some states allow recovery of all or part of your collection fees, others do not.  Certain rates of interest are considered by law usurious, or excessive. A good customer contract will be your best friend. Contact your attorney today to get one.

Collect debts that are legally uncollectible – Each state has a time limit, or statute of limitations that governs how long a debt someone can be held liable for the debt. Also it is illegal to collect a debt that is under the protection of the bankruptcy court. So, do not wait to long to send accounts off for collection!

Collect debts from parties that are not liable for them – Once again, the need for a customer contract is important.  When you are providing product or service to a business, especially a new business, you should ask for a personal guarantee. A personal guarantee means that a business owner takes personal responsibility for debt of their company if they go out of business.

Similarly you cannot hold heirs responsible for a debt of a deceased relative. However, if there is an estate with assets you can make a claim against the estate in an attempt to recover.

In the end, it comes down to communication with your Maine collection agency. Use your agency not simply as a commodity but as a trusted partner. It is perfectly fine to have high expectations, but your expectations must also be realistic.

Maine Collection Agency: Hiring the Best Agency for Your Business

Posted by Marilyn Miller on January 08, 2018  /   Posted in Uncategorized

A Maine collection agency can help a small Maine business improve their cash flow by recovering their bad debt. Agencies typically work on a percentage of sums recovered, with rates can vary based on many factors including the age and size of debt, type of business, number of files submitted annually.

A Maine collection agency seeking to recover debt owed by Maine consumers must be licensed and bonded. The Maine Department of Consumer Credit Protection in Gardiner is the licensing authority. A Maine collection agency seeking to recover debt owed by Maine businesses (commonly referred to as commercial or B2B collection) is not required to have a debt collection specific license. However, as with any relationship, you should verify that the agency is indeed a business authorized to conduct business in Maine.

Your first step is to clearly define, and then articulate your collection goals. Many medical providers prefer a softer, more compassionate approach to debt collection. They want their agency to reflect the personality of their practice. Other companies, particularly in commercial collections want a more dynamic approach, up to and including actions in Maine Small Claims Court.

Once your goals are defined, you must clearly communicate them to potential agencies and see how their approach matches yours.

Other factors to consider are:

1.       Local – How important to you is it that your collection agency be in Maine? We recently successfully completed several large commercial collections for out of state companies who were owned money by businesses in Maine.  Being local created a sense of urgency, and it also provided us the opportunity to see firsthand if the business was still operating. For Maine consumers, a Maine collection agency would have more knowledge of local economic conditions such as mill closings that might impact the consumer’s ability to pay the bill.

2.       Experience – Does the collection agency have experience in your industry? Always ask for you check references.

3.       Credit reporting – While I personally believe that credit reporting is an overused tool in debt collection, if it is important to make sure the agency has the capability to do it.

4.       Research tools – Half of the people sent for collection will need some sort of research (referred to as “skip tracing” in collection-speak. How does the agency go about finding people and their assets?

5.       Technology – Does the agency have the tools to give you the information you need? Also, does their use of technology in contacting debtors work for you? Many agencies use automated calls to contact debtors – will that work for your customers?

6.       Compliance – Consumer agencies are governed by the Fair Debt Collection Practices Act. Medical debt collection must comply with HIPPA.

7.       Legal Capabilities – While Maine collection agencies who are not attorneys cannot represent you in Small Claims Court, if you believe you may want legal services, make certain your agency has a relationship with attorneys who can take your case to court. In the same vein, make certain the agency is experienced in post-judgment collection.

8.       Rate – Notice I listed this factor last – not because it is not important. A competitive rate is great, but make sure you know what is and what is not included. Most Maine collection agencies work on a “no collection, no fee” or contingency basis. What services are included in the rate? A low rate may mean your customer only receives one letter and a few phone calls.

In the end, hiring the right Maine collection agency may be the smartest move you make for your business this year. Best of luck with it.

Hiring a Debt Collector: Five Perks for Your Business

Posted by Marilyn Miller on January 05, 2018  /   Posted in Uncategorized

Hiring a debt collector is a smart move for a small business. Certainly, having a relationship with a good small business debt collection agency will bring money back to your business and help you grow. There are, however, more benefits you can receive from hiring a collection agency.

Focus – As a small business owner, you are busy wearing many hats. It is very easy to lose focus on the money owed to you when you are working to gain new business and service your customers. A debt collection agency’s job is to focus, everyday, on your accounts receivables and on getting you paid.

Time – Collecting money takes time. All business owners need more time. Let a commercial debt collector help you so that you can spend your time growing your business.

Research – The internet, especially social media, provides a good deal of information on people. However, debt collection agencies have specialized tools and can take research to the next level. They specialize in finding people and their assets. The process is called skip tracing and it is critical to successful debt collection.

Conflict Resolution – Customer disputes can be a big distraction. When you outsource your debt collection, you get yourself out of the middle. The best debt collector will help separate valid disputes from bogus ones, and get you involved as needed.

Advice – When looking for the best debt collection agency for your business, find an agency that can assist you with improving your credit practices. Look at your business debt collector as your consultant or coach when it comes to your day to day credit interactions with customers. Your collection agency understands small business credit and can help you structure payment plans that give you a competitive advantage.

Hiring a debt collector can send a message to your customers that you are serious about getting paid. Time after time, we have seen delinquent customers sent to collections get serious, pay their bill, and become a customer again.

Hiring a debt collector is hiring a valued business partner. You must work along with them to get the best results. You will be happy you did.

Document.Document.Document: Contracts Help Collect Money

Posted by Marilyn Miller on January 03, 2018  /   Posted in Uncategorized

I have written many time about the importance of contract to collection of delinquent receivables. Here I am again, because it is that important. It is great to trust people and to have oral agreements with them, but unless and until you commit your agreement to writing, you are exposing youself to the whims and memory of another. And trust me, people often only remember the parts of a deal that benefit them.

Here is an example. I recently made an arrangement with a small business owner to pay a debt owed to my client. The debt was $1,250.00. I knew the business owner was strapped for cash and did not have assets that would make a small claims suit worthwhile, so I offered (and she agreed) to make 4 monthly payments of 250.00, with the balance to be written off if payments made on time as agreed.

The due date of the first payment came and went with no payment received. I advised the debtor that the payment arrangement was in jeopardy. No response. I advised that the payment arrangement was null and void, and billed her for the original $ 1,250.00.

When she received the bill, she contacted me to ask, “I thought we had a deal and I only had to pay $1,000.” Luckily, I had documentation of not only the original arrangement but also her acceptance of the terms. Mind you, these were not lengthly contracts drawn up by my attorney, but simple emails that laid out the terms.

So once more with feeling, as respects payment of debt, here are the contract elements you should commit to writing:

  1. Exact terms of payment: total amount due, amount of payment(s), date/frequency of payment(s), payee and address of payee.
  2. Consequences of non-payment: What will happen if payments are not made as stated.
  3. Bilateral agreement: Customer must agree in writing.

Since I had every detail in writing the debtor had no place to go. In the end, I reinstated the original $1,000 offer, but took payment of $1,000 in a lump sum.

Had I not taken the time to confirm the arrangement in writing, I would have been at a disadvantage. Too many small business owners get caught up in the moment of making a new sale and neglect to document it. They want to close the barn door afer the cows have left.

Take the time, Document. Contracts will be your best friends, time and time again.

Happy New Year! Credit and Collections Resolutions for 2018

Posted by Marilyn Miller on December 29, 2017  /   Posted in Uncategorized

As you finalize business plans for 2018, keep in mind certain steps you can take to reduce delinquent debt in your business and boost your recovery of your past due receivables.

Here are  great credit and debt collection resolutions you can and should make for the coming year:

Use a written contract with all new customers that includes payment terms and addresses consequences of non-payment.

Standardize your in-house credit procedures and communicate to key people in your company

Construct an effective collection letter. You will use it again and again. Get to know your customers and how they pay. Extend credit accordingly.

Establish your deadline for how long you will keep accounts in house before sending to a collection agency and stick to it. Delay can cost you.

Remember that it is business, and never personal. No one says that you have to like it when customers don’t pay you, but instead of getting mad, get paid. Focus on recovering the money owed to you.

Make it easy for people to pay you. Give customers different ways to pay you. Use an online payment portal. Look into some of the newer forms of payment – PayPal, ApplePay, Venmo….heck, chickens if it works!

Document, document, document!

Hire a collection agency that fits your needs and can work with you to get the very best results.

Work with you collection agency and provide them with all information they need to get results for you.

What are your resolutions for 2018? We would love to hear!


5 Credit and Collection Blunders to Avoid in 2018

Posted by Marilyn Miller on December 27, 2017  /   Posted in Uncategorized

Credit and collections for small business can be tricky, but a good plan for the way you extend credit to customers, how you monitor your receivables and how you recover money not paid to you is crucial. Here are some pitfalls to avoid in the coming year.

One size fits all credit – Allowing customers to pay on credit is a privilege you should extend in a thoughtful way. Not every customer should be granted credit arrangements. Know your customers and how they pay. Save your best credit terms for your best paying customers. Others should earn the privilege.

Lack of Documentation – Every phase of your credit process should be documented, from a customer credit application to customer contract. Even a simple email confirming basic details is better than nothing. Remember though, that a customer contract must be bilateral, meaning that both parties must agree to it. Be sure to get a signature or an email confirming their agreement to contractual details.

Late or inaccurate billing – So many collection issues arise from bills that are either incorrect or are sent far too late. Invest some time for quality control before your invoices are sent to customers. Bill promptly.

No in-house collections procedure. You should always be on top of your 30/60/90 aging. Have a plan to contact delinquent customers by phone and by letter.

Waiting too long to outsource collections – After 90 days, if your customer is ignoring you, you need to bring in the experts. You cannot do it all, and when you hire a collection agency, you free up some time to focus on other aspects of your business. Waiting too long will cost you, and not only with a higher collection fee.

It does not take a good deal of time to improve your credit and collections efforts. It only takes commitment to a process.

Business Debt Collection – Easy as ABC?

Posted by Marilyn Miller on December 25, 2017  /   Posted in Uncategorized

Business debt collection is not rocket science. It does involve a consistent commitment to a regular process. Many small business owners spend a good deal of time trying to get the lowest rate from their collection agency. Others will do nothing to collect on their own, yet will be reluctant to send it for outside collection. Both approaches are short sighted, and could sabotage bad debt recovery efforts and be disastrous for cash flow.

In the excellent play and film, Glengarry Glen Ross, the sales manager for a brokerage firm tells his that sales is as easy as ABC, that is, “Always Be Closing”. I contend that the way to get the best collection results is to ALWAYS BE COLLECTING.

Collecting is not just calling delinquent debtors on the phone. It begins with your first contact with a customer.  How do you communicate your prices and how do  you expect to be paid? How much information do you gather on a new customer. Do you make informed credit decisions and do you have a customer contract?

Business debt collection involves being on top of your accounts receivables at all times. You or someone you designate should be assigned with this task, and it must be a priority. This first step will drive the whole process.

Next, establish a procedure for following up on delinquent accounts. We suggest the following:

1.       Compose 2 or 3 collection letters of increasing urgency. Note the word urgency – no anger or threatening. Be firm and specific.  Generally, you would send letters at 30, 60 and 90 days past due, but you can set the schedule that works for you.

2.       Calls to follow up with selected customers.  Use someone with either a relation to the customer, or a position of authority to make the calls. Let delinquent customer know that the issue is being escalated in your organization.

3.       Decide how long you are willing to wait before getting outside help. You can use the same “drop dead” date for all delinquent customers or allow a little more time for long time customers. However, it is very important to stick to the timeline once you set it.

4.      Communicate the process to all in your organization. It is very important that you discontinue new sales to these customers at this time, or at very least make certain the files are marked so that any new sales requests become an opportunity to collect past due sums.

5.       Hire a collection agency. While you will cut down on the files you need to send them, you must be ready to move on and refer for outside collections when the time is right. Develop a checklist to make sure you give your agency all the information they need to do their job.

6.       Continuously monitor your results and adjust as necessary.

Business debt collection should be easy. However, to make it easy as “ABC”, you have to commit to it, and keep the process on track.


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