Small businesses have multiple options when deciding how to proceed in collecting a bad debt. Business owners are not subject to the Fair Debt Collection Practices Act (“FDCPA”) when collecting their own debt, but any third party collection agency that the small business owner may contract with will be subject to the federal debt collection regulations.
Small businesses may engage in all of the debt collection methods available to any creditor who holds a bad debt. Whether seeking a lien against real or personal property, seeking to repossess an asset, or securing a Purchase Money Security Interest in the goods bought with the loan proceeds, a small business has many options to pay business debt. If “self-help” remedies such as trying to collect the debt on their own do not work, small businesses may also seek relief from the court in the form or judgment liens, replevin actions and attachments of property.
There are certain circumstances where the assistance of an experienced attorney is essential and other instances where it may not be necessary. For businesses engaging in “self-help” remedies such as internal debt collection efforts or debt consolidation counseling, it may not be necessary to involve an attorney. However, as the methods used for collection increase, the business should consult an attorney to make sure that the collection efforts are both legal and also have potential to get the business paid. If a small business decided to go to court to see a lien judgment, replevin of property or an attachment, an attorney is critical and should be consulted well in advance of the planned proceedings.
Finding the right attorney depends on multiple factors. First, small business owners should make sure that the attorney they choose has experience in the field and is well versed in the applicable laws of the state in which the debt is being collected or the court documents are being filed. Also, business owners should make sure that they enlist the services of an attorney that they trust, and that they also establish fee expectations at the outset.
The end result of a small business owner taking steps to collect bad debts is that the small business maybe able to avoid being left without recourse in the event that they are not paid by the debtor. The available remedies, including liens and attachments, provide an equitable solution that may allow for the small business owner to be justly compensated for the borrowers’ debt.
In order to fully utilize the services available to small businesses, it is recommended that that an attorney be consulted to discuss options and resources available to small businesses. Having an experienced debt negotiation attorney assist a small business in collecting bad debt can help ensure that the business looks into every available option and resource.