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Wednesday, July 19, 2006

Collection Before It Is Even A Debt

In the current business environment, a business owner, a health care provider, a construction services provider or anyone who provides a service expecting to be paid after the fact needs to be aware of what is necessary to legally collect a debt before it even becomes a debt. The key to what makes a debt collectible is good information. The more information, the more accurate information and the more up-to-date information you have, the more likely you are to collect one hundred percent of a debt that is owed. The less information, the older the information is, and thus the less accurate it is, the more likely you are to not be able to collect a debt.

The two items I would like to see every creditor come through my office door with are a complete credit application and a signed contract allowing for the recovery of attorney's fees and the costs of collection. I realize that is not always possible. However, if there is no impediment to you obtaining those two items from a customer, you should, no matter the cost and time involved, do so. A credit application should at the very minimum contain a customer's employer, including the name and telephone number of their immediate supervisor. That information is necessary so we can call to verify their employment prior to garnishing them. The credit application should also list all of the customer's banking accounts, including the name of the bank, the type of account and the account number. This information will be necessary so we can garnish their accounts. Although not commonly seen on most form credit applications, I would like to see information about any and all vehicles the customer owns identified by make, model, year, color, VIN and tag number. This information is priceless when sending the Sheriff out to pick up a debtor's vehicle.

The second item every business owner should obtain is a signature. Under Tennessee, and under most states' laws, a creditor cannot recovery the cost of filing a collection lawsuit, and most importantly attorney's fees, unless they have a written agreement to that effect signed by the debtor. This does not need to be a long document or anything fancy. It can simply say, "I agree to pay all costs of collections and attorney fees if it becomes necessary to file suit on any unpaid balance." This simple language will allow you to recover attorney's fees. While that may sound like the debt collection attorney looking out for himself, in actuality it means that the creditor can recover one hundred percent of the debt owed, and not be out of pocket twenty to fifty percent of the debt for having to collect it through a lawyer's office. A business owner should think of that signature as debt collection insurance.

If you are not utilizing some system to obtain these two basic simple amounts of information, please feel free to contact my office and I will be glad to review your documents and set up a system that allows you and your employees to obtain this information without your increasing your costs, offending your customers or slowing down your business

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