Getting Paid on Your Delinquent Account

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Covers topics from evaluating your customer's ability to pay to repayment agreements to arbitration and litigation.

Covers topics from evaluating your customer's ability to pay to repayment agreements to arbitration and litigation.

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  • 1. GETTING PAID ON YOUR DELINQUENT ACCOUNT: FROM EVALUATING YOUR CUSTOMER’S ABILITY TO PAY, TO REPAYMENT AGREEMENTS TO ARBITRATION AND LITIGATION Scott E. Blakeley, Esq. Blakeley & Blakeley LLP 4685 MacArthur Court, Suite 421 Newport Beach, CA 92660 Voice: (949) 260-0612 Fax: (949) 260-0613 [email_address] www.bandblaw.com
  • 2.
    • Scott Blakeley is a partner in the California law firm of Blakeley & Blakeley LLP, where he advises companies around the country regarding creditors’ rights, commercial law, e-commerce and bankruptcy law. He was selected as one of the 50 most influential people in commercial credit by Credit Today. He is contributing editor of NACM’s Credit Manual of Commercial Law , contributing editor to the American Bankruptcy Institute’s Manual of Reclamation Laws , and author of A History of Bankruptcy Preference Law , published by ABI. Credit Research Foundation has published his manuals entitled The Credit Professional’s Guide to Bankruptcy, Serving On A Creditors’ Committee and Commencing An Involuntary Bankruptcy Petition. Scott holds an B.S. from Pepperdine University, an M.B.A. from Loyola University and a law degree from Southwestern University. He served as law clerk to Bankruptcy Judge John J. Wilson.
  • 3. The Delinquent Account
    • What Is A Delinquent Account ?
      • Why past due: cash flower vs. disputed items
      • Contract Controls
        • From the vendor’s view
          • Credit policy: Tolerance limit
          • Sarbanes Oxley internal controls and procedures
          • Pre-default action
        • From the debtor’s view
          • Battle of the forms
          • Course of dealing
          • Stop payment/NSF check
          • Counterclaim
  • 4. The Delinquent Account
    • Avoiding a delinquent account through effective credit management
      • Pay close attention to the creation of new accounts
        • The best defense against a delinquent account is to avoid extending credit to those may become delinquent
        • Steps to take
          • Ownership records
          • Locations of projects
          • Require a personal guarantee
      • Maintain continuous communication
      • Assign credit analysts to a person rather than an account
  • 5. The Delinquent Account
          • Build a relationship
          • Understand the ins and outs of their system
      • Respond quickly to disputes, problems, and delinquencies
        • Immediately find all supporting documentation regarding the issue
        • Respond to delinquencies immediately
          • Send a letter
          • Call the sales person
  • 6. The Delinquent Account
    • The Type of Customer
      • The trustworthy vs. untrustworthy customer
      • Ability to pay vs. willingness to pay
      • Ways to determine type of customer
        • Request for financial information and confidentiality agreement
        • Third party comment
          • Salesperson visits the account
          • Contact customer’s bank
          • Talk to industry group members and other vendors
          • Landlord
  • 7. The Delinquent Account
    • Analyze Chances of Successful Collection
      • Collectability
        • Interest 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’ actions
        • Analyze possible defenses to creditor’s claim
      • Likelihood and Effect of Bankruptcy
        • Automatic stay
        • Preferences
  • 8. The Delinquent Account
    • Identifying Potential Sources of Collection
      • Corporations
        • Promoters
        • Shareholders- individual or corporate (alter ego)
        • Successor corporations
        • Partnerships
        • Related Parties
    • Document Retention
      • E-Credit Department
      • Document Preservation
        • Document destruction policy
        • Litigation hold
      • Document retention policy
  • 9. The Delinquent Account
    • 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. The Delinquent Account
    • Repayment Agreements
      • Agreement to take payment over time for past due account
      • Fix the indebtness
      • Waiver of counter claims and disputes
      • Ordinary course preference defense
      • Most favored creditor treatment clause
      • Stipulated judgment- discount coupled with judgment if default
      • Confessions of judgment
        • With debtor’s counsel
        • Without debtor’s counsel
  • 11. The Delinquent Account
    • Arbitration and Mediation
      • What is Arbitration?
        • Binding arbitration
        • Invoking an arbitration
        • A customer’s claims
      • Agreement to Arbitrate
      • Mediation
  • 12. The Delinquent Account
    • 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
      • Pre-judgment Remedies
        • Theory-secure the ultimate judgment today
        • Preserve collateral
        • Obtain a lien not voidable after 90 days
        • Practical Uses
          • Settlement
          • Prevents protracted litigation and additional expense
  • 13. The Delinquent Account
        • Replevin (Claim and Delivery)
          • Elements
          • Need to know specific location of the collateral
          • Proof of affidavits or declarations
          • Documentary evidence necessary
          • Necessity of demand
          • Bond required by creditor
          • Defendant can post redelivery bond
          • Turnover orders (directed to defendant)
      • 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 debtor after personal service
        • May be issued without notice in extreme circumstances
      • Levy (expense)
  • 14. The Delinquent Account
    • Collection on Judgments
      • Elements- commercial debt states
        • Contract- written and oral
        • Readily ascertainable amount
        • Probable validity of claim
        • Unsecured
        • Trade of business
      • Elements-fraud states
        • Fraud
        • Conversion
        • Secreted assets
        • Fleeing debtor
        • Debtor avoiding service
        • Non-Resident debtor
  • 15. The Delinquent Account
      • 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
      • Proof by affidavits or declarations; role of documents
  • 16. The Delinquent Account
      • 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
        • Ex parte application
      • Other provisional remedies
        • Receiver
        • Injunction
        • Accounting
  • 17. The Delinquent Account
    • Collecting of Judgments
      • Judgment liens on real property
        • Effect of judgment lien
        • Creation of judgment lien
        • All real property interest affected
        • Property in more than one county
      • Judgment liens on personal property
        • Personal property subject to judgment liens
        • Personal property not subject to judgment liens
        • Creation of a judgment lien
        • Reach of judgment lien
        • Duration of judgment lien on personal property
  • 18. The Delinquent Account
      • Enforcement of Judgment by writ of execution
        • Writ of execution defined
        • Limited to Money Judgments
        • Issuance of write
        • Levy or writ of execution
        • Obstacles to collection
      • Wage garnishment
        • What is a Wage garnishment?
        • Withholding orders
        • Earnings exempt from garnishment
      • Writ of possession and writ of sale
        • Nonmoney judgments
        • Issuance of writ of possession or sale
        • Time for levy
        • Writ of possession of personal property
        • Writ of possession of real property
        • Writ of sale
  • 19. The Delinquent Account
    • Keep Litigation Cost-Effective
      • Discovery
        • Purpose
        • Types and timing
        • Effect of discovery of creditor’s files
      • 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
  • 20. The Delinquent Account
    • All Out Litigation: When to do it
      • Make a statement to your dealer or customer network
      • Large dollars to collect
      • Solvent parties
    • Pre-Litigation Checklist for Getting the Most Bang for Your Buck- What to do Before you Call Your Attorney
      • Internal Review
        • Review company credit files
        • Review other facts
        • Identify unusual problems
        • Make a broad analysis of the likelihood of collection
  • 21. The Delinquent Account
      • Assemble the Facts and Documents
        • Names of all debtors and guarantors
        • Addresses of all debtors and guarantors
        • Identify any collateral in which your company has a security interest, deed of trust, etc.
        • All locations of collateral
        • Identify debtor’s and guarantor’s other assets
        • Approximate value of collateral and other assets
        • How much is owed?
        • What is the form of debt?
        • Collect all relevant original documents
        • Run a statement account
        • Review all payments made by debtor to your company and to other companies within the preference period
        • Are any goods in shipment, or were any goods shipped within the last ten days; the last three months?
  • 22. The Delinquent Account
      • Prepare a brief summary facts and documents
        • List the relevant facts and documents
        • Mention any possible counterclaims
        • Analysis of account
      • Call the attorney and send him/her the above materials
        • Identify your short and long term goals and problems
        • Ask for an estimate of time, costs and fees
        • Discuss who else should be kept apprised of the status and resolve copies of correspondence, pleadings, etc.
        • State whether you require monthly status reports or other progress reports
      • Follow-up
        • The squeaky wheel gets the grease
        • Keep your attorney informed of any business
  • 23. The Delinquent Account
    • Defenses and Counterclaims
      • Basic Rules
        • You can choose your customers
        • Don’t let you lawyer get ambushed
      • Antitrust/Unfair Competition
        • Pricing and credit issues
        • Restraint of trade claims
      • Fraud, Misrepresentation
      • Contract Interference
      • Discovery Designed to Inhibit the Creditor
      • Documents and Keeping Tidy Files