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Late Payment Collection
Alternatives:Repayment Agreements and
BeyondPresented By:
This manual was created for online viewing. State specific information in this manual is used for illustration and is an example only.
mail: P.O. Box 509 Eau Claire, WI 54702-0509 • telephone: 866-352-9539 • fax: 715-833-3953email: [email protected] • website: www.lorman.com • seminar id: 401054
Scott E. Blakeley and Neal Ganta, Esq.Blakeley LLP
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Late Payment Collection
Alternatives:Repayment Agreements and
Beyond
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mail: P.O. Box 509 Eau Claire, WI 54702-0509 • telephone: 866-352-9539 • fax: 715-833-3953email: [email protected] • website: www.lorman.com • seminar id: 401054
Prepared By:Scott E. Blakeley and Neal Ganta, Esq.
Blakeley LLP
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LATE PAYMENT COLLECTION ALTERNATIVES: REPAYMENT AGREEMENTS AND BEYOND
Scott Blakeley, [email protected]
18500 Von Karman Ave, 5th Floor
Irvine, CA 92612
V. (949) 260-0611 | F. (949) 260-0613
www.BlakeleyLLP.comOrange County | Los Angeles | New York
Neal Ganta, [email protected]
18500 Von Karman Ave, 5th Floor
Irvine, CA 92612
V. (949) 260-0611 | F. (949) 260-0613
www.BlakeleyLLP.comOrange County | Los Angeles | New York
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The Delinquent Account
What is a Delinquent Account? Why past due: cash flow vs. disputed items
Contract controls From the vendor’s view
From the debtor’s view
Avoiding a delinquent account through effective credit management Pay close attention to the creation of new accounts
Maintain continuous communication
Respond quickly to disputes, problems, and delinquencies
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The Type of Customer
Ways to determine type of customer
Request for financial information and confidentiality agreement
Third party comment
3
The Trustworthy
Vs.
Untrustworthy customer
Ability to pay Willingness to pay
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Distressed Debtor What is a distressed debtor? What qualifies a customer as high credit risk?
Should you divorce your customer
Costs of high-maintenance customer
Rising revenues from dropping problem customers
Options to dropping customer
Warning signs of distressed debtor Collections
Judgments
Liens
Bankruptcy
Likelihood of small business to become severely delinquent
Monitoring accounts
4
Distressed Debtor
Credit enhancement checklist Closing the sale while minimizing credit risk
Revisiting your portfolio and credit policies Adjusting your policy to signs of distressed debtor
How was the customer’s business prior to economic downturn?
Is your credit policy too restrictive or too liberal?
Credit scoring and customer information CP’s criteria to evaluating customers’ credit scoring
Credit enhancements
Combining various sources for information:
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Distressed Debtor
Traditional Approach vs. Modern Approach Traditional Credit Approach to the Distressed Debtor
Modern Credit Approach to the Distressed Debtor
Dealing with New Orders When the Customer is Past Due under the Traditional Approach
Dealing with New Orders When Invoices are Past Due under the Modern Credit Approach: Preserving the Strained Relationship
Dealing with Past Due Invoices Under the Traditional Credit Approach: Pay or Else
Dealing with Past Due Invoices Under the Modern Credit Approach: Preserve?
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Analyze Chances of Successful Collection
Collectability Internet as a search tool
Banking information
Availability and sufficiency of security
Asset and UCC search, including real estate search
Bank account search
Review of debtor’s current status
Effect of other creditors’ action
Analyze possible defenses to creditor’s claim (credits, guaranty, antitrust, tort claims, harassment, threats of criminal prosecution)
Likelihood and Effect of Bankruptcy Automatic stay
Preferences
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Identifying Potential Sources of Collection
Corporations Promoters
Shareholders – individual or corporate (alter ego)
Successor corporations
Partnerships
Related Parties
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Document Retention
E-Credit department
Document preservation: requires preservation of any document that may be relevant to any current or future litigation Once vendor anticipates litigation with the customer, the vendor
must place a hold on its document destruction policy, including electronic information such as e-mails
Vendor faces risk of sanctions for failing to place litigation hold
Document retention policy
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Review Workout Possibility
Hardship letter and request for financial information
Final demand by creditor with attorney
Workout to improve creditor’s legal position Secured
Unsecured
Secured and unsecured debt
Settlement agreement
Collect for the debtor
Find financing for the debtor
10
Alternative Payment: Credit Cards
Who bears the transaction fee?
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7
Arbitration and Mediation
What is Arbitration?
Agreement to Arbitrate
Mediation Arbitration and mediation are similar in that they attempt to
resolve disputes with customers without the vendor filing a lawsuit
Mediation is an informal process where the vendor and the customer select a mediator who attempts to bring the parties to a resolution through negotiation
If one party is not happy with the negotiations, they can terminate the mediation and pursue their claim in court
12
Beginning Litigation
Appropriate lawsuit Common counts/breach of contract
Conversion, fraud, fraudulent conveyance
Name all parties, list all trade names, bank accounts business license in trade name
Proper court State
Federal
Jurisdiction
Venue
13
8
Beginning Litigation
Pre-judgment remedies Theory - secure the ultimate judgment today
Preserve collateral
Obtain a lien not voidable after 90 days
Practical uses
Replevin (claim and delivery)
14
Beginning Litigation
Timing Noticed hearing (5-30 days)
Ex parte applications
Collateral in immediate danger of being transferred, concealed, or impaired in value
Temporary restraining order pending noticed hearing issue as an alternative binds only debtor after personal service
May be issued without notice in extreme circumstances
Levy (expense)
15
9
Collection on Judgments Elements – commercial debt states
Contract – written and oral
readily ascertainable amount
Probably validity of claim
Unsecured
Trade or business
Elements – fraud states Fraud
Conversion
Secreted assets
Fleeing debtor
Debtor avoiding service
Non-resident debtor
16
Collection on Judgments
Location/types of assets Deposit accounts
Inventory
Equipment and motor vehicles
Accounts receivable
Real property
Other tangible personal property
Negotiable instruments, documents and money
Securities
17
10
Collection on Judgments
Proof of affidavits or declarations; role of documents
Turnover orders (directed to defendant) Used for property that cannot be located
Can reach property in other states
Avoids expense of levy
Enforced by contempt
Levy Possession
Timing Noticed hearing (5-30 days)
Ex parte application
18
Collection on Judgments
Other provisional remedies Receiver
Injunction
Accounting
19
11
Collecting on Judgments
Judgment liens on real property
Judgment liens on personal property
Enforcement of judgment by writ of execution
Wage Garnishment
Writ of Possession and Writ of Sale
20
Keep Litigation Cost-Effective Discovery
Purpose
Types and timing
Settlement before trial Settlement agreements
Benefits and dangers of accepting a promissory note or notes
Settlement conferences pursuant to court order
Judgments Default judgment
Summary judgment
Trial
Execution on judgment
21
12
All Out Litigation: When To Do It
Make a statement to your dealer or customer network
Large dollars to collect
Solvent parties
22
Pre-Litigation Checklist for Getting The Most Bank For Your Buck – What To Do Before You Call Your Attorney
Internal Review Assemble the Facts and Documents
Prepare a brief summary of the situation
Call the attorney and send him/her the above materials
Follow-up
23
13
Defenses and Counterclaims
Basic rules
Antitrust/unfair competition
Fraud, misrepresentation
Contract interference
Discovery designed to inhibit the creditor
Documents and keeping tidy files
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Notes