Chapter 11INCR E A SING INT E NSIT Y TO ACHIE VE CO L L ECTION

Keeping a Payment Plan on Track

• Reminding your debtor to honor the deal

Send statements to the debtor in advance of each payment due date.

Place reminder telephone calls.

• Promising follow-up legal action: When and How

Formally demand payment

Work to resolve disputes.

When appropriate, enter into a written repayment plan.

Keep good notes and records of your communication with the debtor.

Maintaining Aggressive and Persistent Communications

• Staying in communication with your debtor Striving for an approach to collections that’s both professional

and ethical can help you avoid a lot of trouble.

• Stepping carefully to avoid setting yourself up for a lawsuit Assume that the debtor is keeping notes every bit as good as

yours, maybe better. If the debtor requests verification of a debt, provide it. Make sure that you provide accurate balances for debts. If you’re collecting a debt owed by a member of the military,

respect his rights under the Servicemember’s Civil relief act (SRCA).

Obtaining and Depositing Postdated Checks and Electronic Payments

• Procuring postdated checksThe purpose of postdated checks is to simplify the

c0llection process.

• Utilizing Electronic checksGenerated by to receive money from the debtor’s

checking account.

• Credit Card Payments

Enforcing Liens and Bonds

• Foreclosures

• Construction Projects

Reporting Debts to Credit Bureaus

Making One Final Demand

Chapter 12LO CAT ING HA R D - TO-FIND DE B TO R

• Using Public records and directoriesPublic records may be available through the government web sites

or through the old-fashioned means of going to the govt. office.

• Using Internet ResourcesYou can search free databases and access commercial services on a

subscription or fee-per-use basis right from the computer

• Using your Instincts: They’re better than you think (Additional method of obtaining information)

Implementing a Plan of Action

• How to skip traceSome people are harder to find than others. But you can benefit

from developing a strategy.

A basic strategy to find address information:1. Call the debtor to verify his address2. Check to see whether his mail is being returned.3. Use free internet resources to assist in verifying an address

or locating assets.4. Contact neighbors/third parties.5. Determine whether there’s personal liability or not.

Considerations to Keep in your Plan

Two factors whether to skip trace a debtor:• Are you likely to recover money?• Does the debtor owe enough money to justify the cost and

time investment in skip tracing?

Limit skip tracing where there’s no personal liability Even when there’s personal liability: Practical and legal

limitations of skip tracing Stay on the right side of the law

Chapter 13B R ING ING IN O UT SIDE CO L L E CTIO NS PR O FE SSIO NA LS

How Outside Debt Collection Professionals Can Help You

An entire industry exists to help you collect money that’s owed to you. Debt collection firms operate around the world and offer an array of services.

Debt collection services may propose to: Have their people work at your company Answer phone under your business name Process forms and paperwork to facilitate billing and collections, such

as completing and filing forms for payment from insurance companies.

Considering your options

Professional debt collectors come in two flavors:• Collection Agencies

- typically handle all collection matters up to the point that a case goes to court.

• Collection Law Firms – typically pick up cases around the time they appear destined to court.

When choosing a collection agency, consider how its size and services correspond not just to your immediate needs but also to the expected growth and future needs of your firm.

Selecting a Professional

Characteristics of a good collection service:One-stop shoppingBricks, mortar and peopleMeaningful reportingPrompt communicationAlerts Information on other claimsRemittances on collectionsGood percentage of recoveryRecommendationsTrustworthinessLegal compliance

Determining what services you need for yuor claim

Collection professionals offers some or all of the following services:Pre-collect servicesBilling servicesDocument and form filingSkip tracingCredit reportingCredit interchangesCredit repair

Deciding When (Or Whether) to Bring in the Pros

Far and away the biggest mistake credit executives make is to wait too long before engaging collection professionals. The older the debt gets, the more difficult it becomes to collect.

Factors that may affect your decision: Economic trends in the industry General economic conditions Competition in your industry Requirements of your auditors or banks Factoring companies or receivable insurance contracts

“Why is a Pro any more effective than my own efforts?”

A professional’s procedures are similar to yours, but professionals also benefit from specialized training and techniques developed within the debt collection industry.

Collection professionals know what to say and when to say it. They use their instinct, imagination and creativity within the rules they trained to follow.

They are highly motivated and devote the necessary time to become familiar with your files and your debtors and to figure out what collection techniques will work the best for your cases.

Cost considerations: should you write-off the debt instead of turning it over?

You may incur costs beyond collector’s fee in other situations, like:BankruptcyLiensDefense of counterclaims

Providing information to your professional

Name, address, phone, e-mail, fax, and contact person for both the debtor and company

Exact balanced owed. Separate accumulated interest from principal balanced owed.

Banking connections, if they’re different from what appears on the credit application.

Results of contacts (admission of the debt, promises to pay, disputes raised). Also a copy of phone log.

Any other information you believe will help your professional get a running start, such as knowledge of businesses affiliated with the debtor, any branch locations, alternate phone numbers.

Avoiding and Resolving Problems When working with Collection Pros

In addition to cost and payment, when retaining a professional service, you should address the following issues: Confidentiality

-keeping information confidential Professionalism

-standards of conduct service must meet when handling accounts and contacting debtors Ethics

-service’s obligation not to engage in unethical activities when handling accounts Communication

-service’s responsibility to keep you informed on the status of accounts and to respond.

Get in writing: Entering into a contact for services

The collection industry is highly competitive and you cam expect competitive rates. A contingency fee agreement should describe;When and how amounts recovered are to be remittedCosts chargeable to youHow remittances will be paid

Before you hire a collections professional, figure out what services you actually need and what each service costs.

Establishing standards of ethics and behavior with your collections pro

When you hire collection professional and include them on your collectionteam, you assume responsibility for the professionals to be, indeed,professional and ethical in their service.

Fair Debt Collection Practices Act is a consumer laws that arose from themisconduct of a few irresponsible and abusive debt collectors.

Giving your professional an organized life

The more information you can provide to your debt collector, thebetter. Ideally, your files are organized such that you can quickly duplicatecopies of all pertinent documents and provide them to your debtcollector.

Deciding when to cut and run: Terminating the relationship

Sometimes, due to performance, legal, or ethical reasons, you shouldbreak your relationship with a debt collector. Most of the time, the signsare pretty clear: Debts aren’t being collected Reports aren’t being received Calls aren’t being returned

How to file complaints for poor service

If the relationship between you and your collections professional becomes sostrained that you want to file a formal complaint alleging unethical conduct,missing money, lack of communication, or other problems, keep these pointsin mind: If you claim was placed through a law list, the law list handles your

complaints. If your professional is a lawyer, you can file a grievance with the bar

association in the state where your professional is licensed to practice law. If you located your service provider through a professional organization

such as the Commercial Law League of America, that organizationtypically has a process for receiving and resolving grievance against itsmembers.

Chapter 14DE A L ING WIT H B A D CHE CK S A ND OT HE R R O UG H SPOT S

When you try to collect from your customers, stumbling blocks appear in yourpath. These obstacles may include:

Bad Checks: Customers checks can cause calamities. You’ll inevitablyencounter situations where customer checks fail to clear the bank.

Out-of-business debtors: Your customer goes out of business and has noapparent assets or other means to repay you.

Disappearing debtors: Some debtors disappear, and you discover howcapable you are at locating people who don’t want to be found.

Bankruptcy and receivership: Some debtors obtain court orderscommanding that you stop your collection efforts, or they file bankruptcy.

Countersuits: When you sue to enforce you collection claims, your debtorfiles a countersuit.

Being Proactive: Creating system that help you avoid problems with checks

You need to be proactive and practical when it comes to receiving paymentson accounts. To minimize problems:

Require certified or cashier’s checks from customers you anticipate having aproblem with or who are new and unfamiliar to you.

Monitor your incoming mail and quickly deposit checks you receive.

Put a customer who bounces checks on your list of folks you can no longertrust and accept only cash, money orders, or cashier’s checks.

Establish goo communication with you bank.

Allow 14 or more days for a check to clear the system before you rely onthat check to be “good money” that’s available for your expenses.

Dealing with Problem Checks

Communicate with your customer immediately upon receipts of a bounced check. Hang on the phone for 20 minutes if you have to or go knock on his door. Express in no uncertain terms that the check has to be replaced with real money within 24 hours or you’ll take further action.

Additional advice on specific types of check problems.

1. Nonsufficient Funds (NSF) checks

Minimizing incidence and impact of NSF checks Deposit checks as soon as they arrive. Anticipate NSF checks. Know your customer.

Our state’s laws for nonsufficient funds checks

2. Checks drawn on uncollected funds.

Uncollected funds occur when your customer has deposited a check,possibly from one of its own customers, that fails to clear the bank, which resultsin your check bouncing.

3. Stop-payment ordersWhen a customer stops payment on a check, you know that the

customer intended that the check be dishonored.

4. Checks from closed accountsThis will happen when a debtor issue a check that is from a closed

accounts. The returned check will typically be marked “Account closed” or“Refer to maker.”

Figuring Out what to do when a Debtor Relocates

Attempting to collect across state lines.When a debtor moves, use your best skip-tracing efforts to locate

him. Verifying an address, phone number, and even a new bank account orplaced of employment further the cause.

Using a professional where your debtor is located.Hiring a pro located in or near the debtor’s city can bring fruitful

results.

Being careful when pursuing your money

During your collection your personal ethics and patient are testedbecause your customer have million of excuses why he or she didn’t paytheir debts. You can increase your success in collecting your accounts if youanticipate common roadblocks when implementing collection policies andprocedures.

Some debtors file lawsuits and counterclaim actions against you asa creditor when they sense that your collection in somewhat weak, toavoid their own mistake, or simply to delay or avoid payment.

The most common reasons for a debtor’s lawsuit or threat are:

Perceived violations of collection laws such as the Fair Debt CollectionPractice Act or a state consumer protection law.

The debtor’s claim that the creditor provided defective gods or services. Claims of broken promises of repair, replacement, or other failures

attributed to the creditor. Desperation by a debtor who is in so much financial trouble that he’ll

challenge an invoice’s validity or his obligation to pay on any basis he anthink of, no matter how weak or frivolous.

Feelings of anger and frustration against a creditor. A breakdown communication between the debtor and creditor, triggering

fear or aggressive behavior on the part of the debtor.

When things look bleak: Situations that may require write-off

You can pursue debts owed by your debtors up to a point. Butexactly where is that point? Maintaining an active collection effort againstuncollectible debtors distracts you from other activities, including thecollection of debts from collectible debtors and your other responsibilities.Face up to writing off bad debt when you have determined it to beuncollectible.

Out-of-business customers

If the debtor is an entity such as corporation, limited liability company,limited partnership, or similar entity separate from its owners, and it’s out ofbusiness with no remaining assets, your decision whether to write-off thedebt turns largely on your ability to locate the owners or locate any remainingasset.

What to look when deciding whether to pursue collection: Closed bank account No remaining collectible A/R No remaining inventory, fixtures, or equipment No vehicle No real state No remaining personal property No claims against insurance companies No pending lawsuits as a plaintiff

Debtors who can’t be found

When an individual who is personally liable for what you’re ownedcan’t be located, despite the best efforts of you and any professional you’vehired, decide a course of action based on these factors:

The findings of an investigation by an exam.

The findings of an investigation you conduct yourself, includinginformation from credit reports and Internet sources.

Promises made by the individual for repayment of the debt.

Potential of the debtor to accumulate assets or earn income.

Customers in bankruptcy or receivership

When a debtor files bankruptcy, it’s common to close out a collectionfile. Bankruptcy or liquidation, is often as a no-asset case, meaning that whenthe petition is filed, the debtor’s attorney knows there will be no assets toliquidate. At the end of the bankruptcy, no money is paid to the creditors.

Claims on a deceased debtor’s estate

When an individual person who owes you money dies, you should follow up for collection. You do this by filling a proof of claims with the person’s probate estate in the probate court of the country where debtor resided.

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