Most of the time, our role is to pursue collection of the debt. While we’re performing that role for our clients, they might then have someone who’s chasing them in collection efforts. Our clients might have a legitimate dispute as to why they haven’t paid, but they’re still getting sued or are being harassed by another attorney. When that happens, we can step in and help a client either defeat that claim, if that’s possible, or negotiate a more favorable settlement than what their customer or their creditor might have been offering before we got involved. Our firm does asset protection work, as well, so we help clients use certain asset protection tools to protect their individual assets and, if possible, those of their business if they are liable on a debt.
What Are The Different Types Of Claims That You Generally Work On Behalf Of Your Clients?
There are two overall types of debt: they’re either secured or unsecured. Secured means it’s backed up, so to speak, by a piece of property (e.g., a residence, an office building, the assets of the business, the inventory of the business, the bank accounts of the business, etc.). In our practice, we deal mostly with unsecured debts. Let’s say you sent out an invoice, shipped a product, and believed in good faith that you’d be paid, but the money doesn’t come; or you made a $100,000 loan as an investment in a business and haven’t been repaid. Those are usually unsecured debts.
With unsecured debts, we can’t just foreclose on a piece of collateral. We have to go to court and take steps toward collecting, and if it means going all the way to judgment, then it means going all the way to judgment. Once we have a judgment, we can convert an unsecured claim to a secured claim by recording an appropriate lien, either with the county recorder for real property or with the Secretary of State for unsecured property or for personal property.
There is also consumer versus commercial claims. The focus of this book is commercial claims, or business-to-business claims, as the vast majority of our debt collection practice deals with business-related claims. Business claims generally involve greater sums of money than consumer debts. They’re also easier to collect than consumer debts because businesses don’t have the same exemptions and defenses that consumers do. California is a very consumer-friendly state, so they make it more difficult to collect on consumer claims. I’ve always enjoyed the business-to-business aspect of the claims more, which is why we’ve focused on those types of debts.
What Is the Role Of A Collection Agency In The Debt Collection Process?
Before coming to us, our clients will sometimes hire a collection agency to collect a debt, which is fine. Collection agencies are limited, however, in what they can do. They’re not licensed attorneys, so they can’t file a lawsuit for you. They’re limited to writing letters to the debtor and calling them to try to convince them to pay. Sometimes it works, sometimes it doesn’t. Sophisticated debtors know that a collection agency can’t sue them, whereas if they’re hearing from us, they know that they might get sued by a law firm if they don’t pay.
We feel that we have an advantage over collection agencies in that respect. We can do everything they can do and then take it beyond that to file lawsuits and enforce judgments if we have to. Collection agencies are fine for smaller debts (under $5,000 or so), but we can accomplish far more than agencies for larger debts.
How Large Should A Debt Be Before It’s Reasonable To Hire An Attorney And File A Lawsuit?
Dollar-wise, I would say businesses with debts of $5,000 or below should consider using a collection agency or going to Small Claims Court. In California, businesses can go to Small Claims Court for debts that are $5,000 and below. We can write a letter or two for you to collect small debt if you don’t want to deal with it, but we’re not going to sue because there’s not even enough money involved to pay the attorney’s fee. If our clients want to continue pursuing debt under $5,000, we recommend they try to collect on their own through Small Claims Court. Larger companies might have multiple accounts that are owed, so they can file ten small claims lawsuits at the same time and get a bunch of judgments all at once.
For more information on Debt Collection Law in California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (714) 594-6322 today.
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