How are Commercial Collections Different from Personal Collections?
Personal collections involve the process used to collect on a debt owed by a private individual for a personal or family purpose in most instances. Commercial collections are generally for past-due receivables of a business owed to another business or individual for a business-related transaction or debt.
How is a Commercial Collection Performed?
Typically, a company will hire an attorney or collection agency to pursue a commercial collection matter. They will investigate the company’s assets through public and private records. Many commercial collection attorneys use a subscription-based database to obtain records of assets. Letters followed by phone calls are made to the company asking for money. The collection efforts cannot be abusive or threatening and must follow the rules set forth in the Fair Debt Collections Practices Act.
If there is no response or a refusal to pay, the next step is to file a lawsuit. Some attorneys or collection agencies will only file a suit if there is little to no possibility of litigation and a summary or default judgment can be easily obtained if the collection attorney has supporting documents.
In matter of personal collection, a lawsuit may be filed if there is a reasonable certainty of collecting. Otherwise, obtaining the judgment is just an added expense in an often empty exercise. In most states, however, a judgment is good for 10 years and is usually renewable.
Enforcement of the Judgment
A commercial creditor is more likely to be able to levy on a bank account. An attorney might be able to serve restraining notices on banks holding the debtor’s accounts to preserve funds for collection. Most states allow judgment debtor depositions, in either personal or commercial collection matters, to ascertain the identity and location of assets for seizure. Armed with a writ of execution or similar document, the sheriff can seize a bank account’s funds or the company’s business equipment, vehicles and real estate to satisfy the judgment.
Another option is to issue restraining orders or serve subpoenas on third parties who owe money to the judgment debtor business and to collect those payments directly from them. This option is not possible in personal collection matters.
Obstacles to Enforcement
Even with a judgment, the judgment debtor business may no longer be in business or has been merged or purchased by another company who must be located and the process possibly begun anew. Some assets may already be encumbered or there may be other unsatisfied judgments against the business.