When Should You Place A Claim for Collections?
December 19, 2019
Often times, when payment is late or a bill is past due, a creditor tries to give the debtor the benefit of the doubt. They’ve sent multiple collection letters, calls go unanswered or promises to pay up are broken. So, where and when do you draw the line?
How long is too long to wait to place a claim?
Generally speaking, if an account is 90 days old, it is time to take further action in collecting on the claim. At this point, you’ve probably made multiple attempts to collect, but have come up empty handed. Often times, creditors wait way too long to act on a claim, allowing the debtor to get away with excuses for nonpayment. If a creditor waits too long to place a claim for collections, the debtor may be out of business by the time the creditor decides to pursue the debtor, leaving the creditor with a slim chance of recovery. If you have received no response from your calls and demand letters, then it is time to place this claim for collection.
The debtor keeps making excuses, what should I do?
When your letters or calls are ignored or your debtor refuses to make a payment or agree to a payment plan, that mean the claim is ripe for placement. Debtors often try to string creditors along in the hopes that the creditor will believe their promises for payment or that the creditor will just get tired of chasing them.
If your debtor:
1. continually makes promises for payment, but then refuses to make an immediate payment;
2. repeatedly asks for documentation to substantiate the debt, even though the creditor has already provided it to the debtor multiple times; or
3. suddenly claims there’s a dispute to the goods provided or the services performed, but failed to timely return the goods or object to the services performed;
then it’s time to place a claim for collection.
Is my claim too small? Is it even worth placing?
The size of a claim should never deter you from placing it for collections. Claims that are at least $1,000.00 can be successfully recovered by a collection letter, or litigation, if necessary. However, if you have a claim that is under $1,000.00, filing a lawsuit to collect this amount can be costly, and you may be incurring costs that near the size of your claim. Nevertheless, sending a debtor a letter from a lawyer or law firm can dramatically increases your chances that your debtor will pay up and then further lawsuits and/or litigation can be avoided by both parties.
How can I tell if the debtor is still operating before, I decide to place the claim for collection?
There are a few factors to consider before placing your claim for collection. After all, you don’t want to waste your time and money going after a debtor that is no longer operating. Looking at these factors may also help increase your chance of recovery;
1. Does the debtor’s phone number work?
If the debtor’s phone number is working and is being answered by a live person in the name of the business, the debtor is still operating.
2. Does the debtor have an active website?
If the debtor maintains and active website or has recent posts on social media, that is a great indicator that the business is currently operating.
3. What is the debtor’s standing with the Secretary of State?
If the debtor is listed as “Dissolved” and the debtor’s phone number is disconnected, it is likely the debtor is no longer operating. In this case, your chances of collection could be low.
While each claim as its own nuisances, it is helpful to evaluate the size of a claim, the age of the claim, and whether the debtor is still operating. Evaluating these factors can help you make an informed decision to place a claim for collection and may even increase the likelihood of recovery.
If you think it is time for you to place a claim for collections or are still unsure what your next step should be, please contact us for a free consultation.