Creditors’ Rights – Options for Getting Your Clients to Pay

Clients who refuse to pay for services rendered are not only frustrating but can represent a real threat to your company’s bottom line. Fortunately, creditors have recourse at their disposal. But taking self-help measures is not always the right way to go. Here are some strategies to help you collect from delinquent clients without resorting to strong-arm techniques that could put your company at risk.

Creditors’ Rights

As a creditor, you have the right to pursue reasonable remedies to collect a legitimate debt. Such remedies include contacting the client at home during reasonable hours or hiring a third-party collection agency to attempt to obtain payment. However, creditors should be aware that debt collectors are bound by the requirements of the Fair Debt Collection Practices Act (FDCPA). These regulations prohibit abusive collection tactics, such as contacting third parties (including a debtor’s employer), harassment techniques, or making fraudulent claims.

Options when Clients Won’t Pay

When self-help collection strategies fail, the law provides additional remedies. Creditors with secured debts may be entitled to seize a delinquent debtor’s property without going to court. Other remedies include liens that are attached to a debtor’s property in an amount that equals the sum owed to the creditor.

When a creditor obtains a lien judgment, recovery can take place in two ways. First, a sheriff can be dispatched to recover property from the debtor. Alternatively, a sheriff can arrange for the sale of a debtor’s property and distribute the proceeds of the sale to creditors.

In extreme cases, creditors may force a debtor into involuntary bankruptcy, which liquidates a debtor’s assets to distribute them to creditors. In both voluntary and involuntary bankruptcy proceedings, secured creditors take precedence over unsecured creditors. However, creditors who pursue involuntary bankruptcy against a debtor in bad faith can face substantial penalties.

Do you have a client that won’t pay? Don’t take matters into your own hands. Give us a call today.