Bad-Debts – Getting Your Debtors To Pay
You've spend endless hours, days and weeks to set up your business. Every step has been carefully planned and executed. You've been prudent all along. Most of all you've always believed that your customers and suppliers are trustworthy and above board.
For a while things were running smoothly. Until that dreaded day when you were tossed out by a customer who refused to settle your Bad-Debts that built up over time and now amount to a small fortune. Or the supplier who has taken your money in advance but failed to deliver the goods.
Considering your recovery options
Thinking of recovering your bad-debts, you probably threw a fit with thinking about attorney’s fees washing over you. While the situation could get worse, help is at hand. In most circumstances you can collect your Bad-Debts without initiating legal procedures.
If the amount in question is tiny, you can contact a court dealing with small claims in your local area and request them for the required paperwork so that you can file a claim. This way no attorney will be required to represent you or file paperwork. The fees are also modest and decisions are generally made on the very day the hearing takes place.
You still need to state your own case and present the documentation, evidence or other proof that may be required.
Mediation and arbitration
Mediation is your next option to recover bad-debt. Dispute resolution can take many forms. For example, mediators are provided by a few courts dealing with small claims. Instead of listening to a case, the judge could very well request the parties involved to involve a mediator so they can come to a settlement outside of court. Alternatively the disputing parties may decide to use the services of a mediator so that they can settle on an arrangement suitable to both. While mediation is far less expensive than taking legal action and is much faster it rests upon the disputing parties to mutually agree on a settlement of the bad-debt.
Another variation of mediation is arbitration. Arbitration enables disputing businesses to involve an arbitrator who is impartial and will hear both sides of the case. Arbitration, like mediation is cost-effective and faster than legal options. Unlike mediation, the arbitrator hands down a ruling that will have to be honoured by both sides.
Engaging a collection agent
A familiar option to bad-debt recovery is engaging the services of a collection agent. While this takes the burden off your shoulders, collection agents generally take on cases that have a perfect opportunity for success. Some of them also can be expensive, with some collection agents charging half of what is collected on your behalf.
Whichever option you choose, you should be prepared to know how far you will go to recover your bad-debts. Your customer may plead that he is broke but his assets and lifestyle may suggest otherwise. You can then decide if you will pursue the entire amount. Provided there is evidence of substantial assets it's advisable to go after your share, otherwise you may just cut your losses and cut your losses.
The legal option
As a last option you may want to consider using an attorney. If the amount you wish to collect is huge, and beyond the scope of small-claims court an attorney could well be worth all the money spent. If you are negotiating with a person who is being particularly difficult, you do not have an option but to bring in an attorney.
In many cases bad-debts can be recovered without hiring an attorney. Ultimately the decision is yours and should be carefully considered by weighing the options. If the disputed amount is relatively small and the customer acts belligerently, you may even consider letting the matter slide.