After Receiving No Response From A Debtor, Legal Proceeding May Than Begin

Category: Finance, Credit.

Businesses that extend credit to their clients can be a very advantageous situation. Unfortunately, businesses can sometimes have the problem of collecting bad debts.

This can attract more sales by giving clients an extra convenience. To avoid having to collect on bad debts, it is important for a business to lessen the problem of bad debts before a problem even arises. First there are credit management strategies. If a bad debt does occur there are different methods a business can implement in order to collect on bad debt. A business should always state clearly the terms related to extending credit and do thorough credit checks. It also helps if the company maintains accurate records and makes notes on any amount of money that is due or overdue. The business should be sure that all credit agreements are put in writing and signed.

Credit ratings should be evaluated regularly and if practical for the company, have the client give a deposit or pre pay for any services or products. A business should always have a specific practice for following up on debts. The company may even want to collect payment as a project progresses to reduce the possibility of incurring a bad debt. Making phone calls, visiting customers or sending polite reminders are some things that can be done. A business may want to contact the individual that owes a debt and come to an agreement on payment. If a bad debt still occurs after using some strategies for credit management and the company need to recover the debt, they may want to try a consultation.

The company can get assistance from centers such as the Community Justice Center to resolve any debt disputes. The letter should request that the amount due be paid by a certain date. If debt consultation is unsuccessful, a business may want to send a letter of demand to the individual or company that owes money. The letter should detail the debt and warn that legal action will be taken if the debt is not paid by the date specified. A business may prefer to send a letter asking for payment instead of a letter of demand. A company should be sure to evaluate the situation before using legal means to collect a debt.

A statutory letter can also be used if the debtor does not respond to a letter of demand. A statutory letter lets the debtor know of impending legal action that will commence in twenty one days. This type of letter is similar to a letter of demand but it is sent out like a court document. After receiving no response from a debtor, legal proceeding may than begin. The kind of legal action taken depends on the amount of money owed. A business should be aware that starting legal proceeding is the most complicated way to collect a debt.

Small Claims Courts deal with debt up to$ 10, 000 while the General Division of a local court can handle debt that is up to$ 40, 00 Legal proceedings can be expensive so a business should consult their local court for information on potential costs.