By: Joshua Hancock, Law Clerk, Dorman Bell, LLP
COMMERCIAL DEBT COLLECTION
Unpaid account receivables are a liability for every company. For small business owners, unpaid debt affects cash flow and personal finances. Attempting to collect past-due debt usually becomes arduous and time consuming. When initial debt collection efforts have fallen short, a company must consider other alternatives. Retaining a law firm that specializes in commercial debt collection allows you to return your focus back on business while the firm handles the recovery of overdue debt obligations.
What is the difference between consumer debt collection and commercial debt collection?
The processes of how a creditor may collect debt varies greatly depending on whether the the debt is either consumer debt or commercial debt.
Consumer debt collection is what it sounds like. It covers activities between a business, as creditor, and a consumer, as debtor. Consumer debt collection involves situations like failing to pay a credit card or failing to make payments on a new appliance. Texas law places strict limitations on how and how not a creditor may collect consumer debt.
Commercial debt collection is often called business-to-business debt collection. One business or business owner has not paid the other business according to the financial terms of their agreement. In Texas, commercial debt collection is much less regulated. This is because commercial debt collection is exempt from most federal debt collection laws, as those laws specifically address consumer debt collection.
Hiring a Firm is in Your Best Interest
When your business extends another business with goods or services on credit, your business deserves to be paid by the terms of the agreement. It is understandable that creditors are justifiably hesitant to waste good money chasing bad debt that may never be paid. Hiring a firm that specializes in commercial debt collection is valuable for a few reasons.
First, the circumstances around every debt collection are unique. A firm will thoroughly evaluate all relevant factors such as the available collection remedies, the amount of money at issue, the debtor’s available assets, and the debtor’s potential defenses when considering legal action. A firm will let you know up front whether pursuing collection of a past due balance makes economic sense.
Next, business relationships are sensitive. In almost every consumer debt collection case, the creditor has zero interest in maintaining a good relationship with the debtor after the recovery or settlement is finalized. The creditor just seeks repayment. However, in an ideal commercial debt collection situation, the creditor recovers the unpaid debt and the business relationship moves forward. An amicable demand letter may be enough motivation to prompt repayment from the business all without tarnishing future relations. If a demand letter is unsuccessful, the firm can bring collection litigation on your behalf straight to the courthouse. As client, you remain in control of all final decisions regarding both potential settlements and potential law suits.
Seek a firm that specializes in commercial debt collection
If you own or operate a business and need help with commercial collections, seek a consultation from a legal firm that specializes in commercial debt collection. Generally, retaining a firm is efficient and cost effective. At a consultation, a firm can review all of the relevant facts and provide you with a personalized course of action.