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3 Legal Remedies for Massachusetts Commercial Debt Collection
Part of running a business is assuming that some of your invoices will go unpaid. However, when the debt is too large or too old to ignore, you have 3 choices: 1) deploy in-house collection efforts, 2) replevin, or if that doesn’t work, 2) court intervention. Whether you are in the midst of the former or the latter, speaking with a Massachusetts commercial debt collection lawyer can help you navigate the complex nature of collecting debts from your business customers.
The method you choose depends upon your company, size, revenue, number of employees, nature of the debt, and the recommendation of your attorney. Some of your strategies may even be based on a hybrid model of debt collection with outside counsel. The actions you take during the process are just as important.
Before we dive into legal remedies, it’s important to remember that you should document your collection activities no matter which direction you take. You will rely upon your records heavily in order to collect the debt. Now, let’s take a closer look at the legal remedies available in Massachusetts for commercial debt collection.
1. Self-Directed In-House Collection
In-house debt collection efforts look different for every business. Single-person operations are tasked with managing every aspect on their own. Large corporations have entire departments within their finance units to launch full-scale efforts. Most businesses fall somewhere in between. Typical internal collection efforts include:
– invoicing past due accounts and document client accounts
– sending final notice and demand letters to the debtor
– negotiating a repayment plan to satisfy bad debts or collecting cash
– working with a licensed Massachusetts commercial debt collection lawyer
– maintaining meticulous documentation on all customers and interactions
– obtaining court orders to take back commercial property for liquidation
Using internal resources to collect debts is often the least expensive method in the short-term. However, Massachusetts commercial debt collection is complex. Some rules that apply to business-to-consumer (B2C) collections do not apply to business-to-business (B2B) and vice versa at the state and federal levels. In order to cover your bases, contracting with a Massachusetts debt collection lawyer is critical.
2. Seeking Restitution from Collateral and Other Securities
Trying to obtain repayment through the collateral originally posted to a secured loan is another legal remedy you can take. If you have this type of transaction available, and the debt went unpaid after exhausting day-to-day collection efforts, you may want to go forward with taking the asset as repayment.
Commercial financial instruments are handled differently in terms of creditor priority. Secured transactions take priority over unsecured transactions in a bankruptcy or commercial debt collection lawsuits. The secured transaction lender is expected to “perfect” the loan by filing the required paperwork. Massachusetts debt collection lawyers can provide counsel and advocate during this process.
3. Intervention Through Massachusetts Small Claims or District Court System
When independent collection efforts prove to be futile, your next option is to work with the civil courts to collect on the debt. There are several opportunities available to you including seizure of the property and liens. Creditors may even be able to push the debtor into bankruptcy. Depending upon how the debt is structured, you may be able to use a combination of legal court remedies.
Replevin Can Recover Property
Replevin is an action you can file in a court to take back the property to which you hold the title. Replevin actions are more contractual in nature. Examples of replevin attachments include:
– Recovering tangible goods on a secure loan
– Evicting a commercial renter
– Return of funds in a trust intended for the business
– Taking back leased furniture, vehicles, and office equipment
Replevin actions require filing in court along with ample notice to the party you are suing for the recuperation of the property associated with the debt. If you win your case, an order will be issued for a sheriff to recover and return your assets. A Massachusetts commercial debt collection lawyer can help you execute this strategy.
Lawsuits and Liens Are the Next-Level Options
If your collection efforts have been proven to be futile in preceding actions, then you can sue your commercial client. A successful outcome of the lawsuit results in a judgment or lien that can be used as repayment. One those instruments are obtained, a sheriff can recover the property, or the debtor can pay you in cash if they have it and are ordered to do so. There are other lien and attachment options available to discuss the terms of your situation with your attorney.
Involuntary Bankruptcy Proceedings May Be Your Last Resort
The final option available to creditors is to force the party from which you are trying to collect into involuntary bankruptcy. Involuntary bankruptcy actions are highly complex and better-suited as a last resort for large debts. In short, an involuntary bankruptcy is when the creditor petitions the court to push the debtor into bankruptcy. This technique is not a short-term gains approach since commercial bankruptcy involves liquidation and reorganization on substantial assets.
Take Back Control in Massachusetts Commercial Debt Collection
Commercial debt collection is a much different game than consumer debt collection. But it is necessary to mitigate your losses as an organization. You have the absolute right to perform all collection efforts on your own, but only an attorney is qualified to give you legal advice and answer your questions. He or she has the experience, knowledge of the law, resources, and ability to reason critically. It brings peace of mind to have the right firm in place for your company.
At Goldberg & Oriel, we know what your business is going through. If you qualify, your case may be eligible for payment on contingency. This means that our firm doesn’t receive payment from you unless we are collecting past due debts from your former clients. Schedule a free consultation by calling us at (617) 401-7400 or by completing our contact form. We appreciate the opportunity to serve you.