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Mahan Law Blog

Thursday, August 28, 2014

Accounts Receivable Help

Every business will eventually face the reality of a bounced check or mounting accounts receivable.  Where does your business start?  Usually smaller companies are stuck with a few options:  (1) Turning over bounced checks to the county attorney, (2) selling or handing the accounts over to a debt collection agency, or (3) seeking out an attorney.  Each option comes with its own caveats:

The County Attorney

Generally speaking, bad check laws make it a criminal "theft" offense to bounce a check for a contemporaneous exchange of goods or services.  As a result, businesses can turn over these types of bounced checks to their County Attorney.  The County Attorney can bring theft charges against an individual (usually not businesses) to collect upon the bounced check by way of restitution in the criminal action.  Restitution would include the amount of the check in addition to a fee charged by the County Attorney.  This means generally you are not out any legal fees when pursing a bad check this way.  The shortfall of this method is (1) it is only for contemporaneous exchanges and not debts upon an account, (2) it is generally against individuals and not businesses, (3) it often results in a court order to repay, but the County Attorney does not have the time or resources to pursue collections by way of executions on property, liens, wage, or bank garnishments, and (4) the County Attorney may not be aware or pursue civil remedies such as treble damages.

Debt Collection Agencies

Debt collection agencies also pursue debts of small businesses and have an added advantage of specific knowledge relevant to debt collection laws.  These agencies normally have collectors that track down debtors and make written and/or verbal demands for payment.  Most of all the advantage here is that the larger agencies have a national presence to help pursuing debtors throughout the United States.  Fees for these agencies can be upwards of 50% of the amount recovered plus any suit fees and litigation expenses incurred.  The downside is that these agencies normally go after the easier accounts (persons willing to pay or set up payment plans) and turn over the more difficult accounts to debt collection attorneys and law firms.  This means that they are often collecting upon accounts that would have paid you directly and are getting paid as a middle man to turn over all other accounts to attorneys.

Attorneys

Debt collection is a specialized field which can be problematic for attorneys without experience collecting upon judgments.  Just about any attorney would be capable of successfully obtaining a judgment against someone that owes you money due to breach of contract, but they may not be versed in the methods of enforcing the judgment to obtain money.  Furthermore, attorneys that do not have significant experience with collections will either charge hourly or typical contingency fees of 1/3 any amounts collected.  A general practitioner will often charge anywhere from $100.00 to $250.00 just to write a demand letter.

Debt collection law firms typically have specialized software that will calculate interest upon breached contracts or accounts, skiptrace debtors to find assets for collection, and can monitor files over long periods of time for payments.  Attorneys with collection experience have knowledge of the specific debt collection laws and specific court requirements.  The caveats of this approach is that debt collection firms generally charge contingency fees upon any amount collected.  The incentive is therefore to settle accounts as soon as possible and avoid extensive litigation (although there are some firms that provide all around collection proficiency).  Here however you will likely pay the contingency fee even if the account settles on the first attorney letter.

The Mahan Law Way

At Mahan Law our goal is to have an integral and personal relationship with our clients.  We do this by offering small and mid-sized businesses monthly retainer programs that provide flat monthly fees for all routine legal services.  For our monthly retainer clients we will try to collect on debts, or defend improper collections, without any additional fees or contingency up to the point of a lawsuit being filed.  At that point our retainer clients enjoy a reduction in both suit fees and our contingency rate should we need to go to court for any collection.  The reason for the reduction in fees is simple--we are confident that by utilizing our services on a monthly basis you will be proficient in the way you transact business with customers either by contract or account making the entire process easier.  We will also have a better understanding of your business because we have helped you along the way.  Clients with routine collection activities often enjoy higher return on collection activities because they are not paying flat fees for attorney letters or any contingency on money received from non-litigated activities.  For more information on our services please contact us.




Our office is conveniently located in Newport, Kentucky (less than two miles from downtown Cincinnati), but we handle cases throughout the states of Ohio and Kentucky. We also routinely meet with our clients at their offices or homes if more convenient.



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