Debt collection is an essential and often necessary part of running a business. Whether you’re collecting from customers, partners, or suppliers, lawyers can provide invaluable help. Massachusett Debt Collection Attorneys is a law firm specializing in debt collection law. With years of experience, our lawyers have handled thousands of business-arrear disputes. Most business owners need to familiarize themselves with this process, what to do when the arrears have not been paid and when collections need to be legally pursued. Our lawyers have years of experience dealing with creditors and debtors. We have the knowledge and skills you need to recover your money successfully. Here are the steps you’ll need to take to protect your business from being further negatively affected by a customer’s arrears.
1. Letter of Demand to the Debtor
The first step in recovering an arrear is to write a letter of demand to the debtor. This letter is your formal notification to the debtor that you think they owe you money and that you want it back. The letter should contain all the relevant details, including how much the debtor owes, when they are supposed to pay it, and your contact information. Payment information of the creditor (e.g., bank details) must be contained in this document for it to stand up in court.
2. Writing Your Invoice
An invoice is a statement of charges or amount due to the person who has purchased your goods and services. It should always include itemized details on what the debtor has bought, the price, and when they are supposed to pay (depending on your business’s policies). It should also include your contact information. You can usually send an invoice before you have received payment. You can send it along with the original product or service and still be considered timely. Legally, the invoice confirms the real deal between you and your customer.
3. Initiate Court proceedings
If the debtor does not respond to the letter and no payment is received within a reasonable time, you are ready to take the next step. The next step is to file a complaint with the court on a non-judicially noticed basis. This involves filing an affidavit of complaint, initiating service on the debtor (more info below), and filing a summons returnable before the clerk by the stipulated date. The amount claimed in small claims court is limited to $7,000. For very high sums owed or for companies you need to sue for multiple disputes, you must go through Judicial Procedure.
4. Filling in a Claim Form
Once you have filed a complaint and the defendant is served with the summons, you must fill out a claim form. This form is your request for the court’s order to take control of the debtor’s assets. The most critical element of this form is to include a proof of service, which provides for your affidavit of service and the original summons. You will need to send a copy of the summons returnable to the clerk’s office along with the complaint, charge, and claim form. The debtor must be served with a copy of the summons returnable and the complaint and claim form. This means they were sent by a court employee who received a copy of the lawsuit in person or by mail.
5. The Debtor’s Response to the Claim Form and Summons
The defendant will have up to 20 days to respond after being served with the summons. The response must be in writing and contain any defenses against the claim. This is crucial for you as this is usually the time when you start negotiating a settlement based on the information you have. To help argue your case, you can add whatever documents or evidence you believe are relevant to proving that your debtor owes you money. You might also send a copy of the lawsuit with a cover letter explaining why it was filed to give this documentation some weight. The cover letter is included to demonstrate that you have already tried to work things out with the debtor but to no avail.
6. Prepare for Trial
You will have your day in court if a settlement can’t be reached. As part of your preparation, you should be able to assemble all the documents supporting your claim and evidence proving the arrears are legit. This can include contracts, bills of sale, or similar documents that show how much was bought or sold at what price, as well as documents like delivery notes and letters from the debtor or any other witness or third parties who know anything about the case. If you have initiated a criminal side of the dispute (e.g., the debtor is a fraud), you will have to provide the court with any evidence of this.
7. The Hearing Date
The hearing date is at most six months after filing the complaint. The defendant will have 14 days after receiving a summons and complaint to file an answer if they want to contest the case in court. If they fail to answer, it can be assumed that they accept the claim. If you are confident of your case, it might be advantageous to move forward without an answer and instead rely on your evidence at trial. This may help convince the judge that you are right.
8. The Trial and Court Decision
The trial is held in open court, and both parties must prove their cases. The judge will consider the evidence presented on both sides and make a ruling. If you win, the judge will make an order or judgment stating that you are entitled to recover the deficit by one of the means stated in the order. The means of payment could be a bank account garnishment, property seizure, or money levy on a particular bank account, depending on your claims.
If your business faces any debts owed by customers, it’s always early enough to take action against those who owe you money. You can choose between two primary forms of legal action that will depend on the nature and amount of the debt. Contact Massachusetts Debt Collection Attorneys to find out how we can help collect your debt.