An Entrepreneur' s passion burns deep in his or her's heart to create and to prosper , while a deadbeat is nothing more than a heartburn that simply needs to be extinguished.
The sooner you take the bitter medicine the quicker you eliminate the negative effects.
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ASK AN ATTORNEY
: What paperwork should we have to best protect our rights against debtors who unfairly dispute claims just to cause a delay in our right of payment and/or what documentation is the most helpful when a case is forced to trial?
A: The more documentation, the better. As the creditor, you have the burden of proof. Written evidence is best; get everything you can in writing. Credit applications/ terms and conditions of sale/ properly-drafted personal guarantees/ proof of delivery/ purchase orders/ acknowledgements of the indebtedness, etc. Save all communications from debtors. Put all of your agreements in writing. Emails count. Save them. If you have phone conversations with a debtor, take contemporaneous notes and then confirm any agreements in writing. Save your phone notes. If debtors raise a dispute, respond in writing immediately to avoid any argument that you implicitly agreed to by failing to respond. While debtors may still find a way to stall litigation with disputes which have no merit, the well-prepared creditor with a well-documented file will generally fare better and suffer fewer surprises than the creditor that was not as prepared. When in doubt . . . Document! Document! Document!
Christine Hayes Hickey Esq.
Rubin & Levin, P.C.
A: As a reminder the justice system is set up to allow both parties a fair trial. In Illinois the court rules allow the parties to issue discovery and take depositions in claims over $10,000.00. Although perceived as a stall tactic or delay each party has the right to conduct discovery. This allows both parties to be ready for trial.
The best way to handle a case is to work together with the attorney to get the discovery filed promptly without delay. Answer the questions and work with the lawyer to ensure that discovery is completed timely. It is to the plaintiffs advantage to move the case thru all stages of litigation quickly. This will allow the attorney's to request the court to schedule a court date for trial. Use the discovery process to the creditors advantage; gather all credit applications, emails, letters and prior payments to assist in proving case. The discovery process should be used as a tool to ready the case for trial. The more evidence that is presented will lead in a successful verdict.
Michael S. Baim, Esq.
The CKB Firm
A: There are things that can be done to limit the debtor's ability to dispute the claims, or at least successfully dispute the claims at various different stages of the relationship between the parties. First, if the client has a contract with the customer, there can be a provision in the contract which limits the time period that the customer has to raise objections to the work that was performed. Once that time period has passed, at least client has a strong argument that the items were received, were retained, and no objection was made within the time period and therefore any dispute is potentially frivolous. Client can also obtain written approvals of work to be performed prior to the time work is performed. This limits the type of dispute that can be raised if the work is pre-approved by the customer. Once the account becomes past-due and follow ups are made in order to obtain payment, it is important to obtain as many admissions as possible to confirm the reasons for non payment. Often the customer/debtor will admit that the only reason they are not paying is because of cash flow problems. If you can't obtain that admission in writing along with a proposal to make payment signed by the debtor, at least send a confirming letter, confirming that they have admitted the balance due. If that letter or e-mail is sent and there is no objection or response to it, later on that can be used as an admission of the validity of that claim.
Each of the above are valuable assets if the matter cannot be resolved and ultimately has to go to a lawsuit and trial. In addition, if there are any meetings or telephone conversations in reference to payment of the debt or attempts to make arrangements on the debt, it is always valuable to have more than one person present at that time so at a later date if the customer/debtor attempts to change their story on why they are not paying, there are multiple witnesses to dispute that. This can also be used as the basis for summary motion in order to avoid trial in cases like this.
It is always a good idea to have something signed by the debtor. If the debtor makes a proposal to resolve the matter with long extended payments, even if they are not acceptable, it is a good idea to e-mail or fax a letter to him setting forth those arrangements and have him sign and send back a confirmation of those arrangements. You can make the arrangements subject to final approval, but at that point you at least have an admission in writing signed by the debtor admitting the debt. Any time you can extract a payment from the debtor on the account, that becomes an important admission. A payment on account creates a new cause of action against the debtor called "an account stated." If you sue on "account stated" the debtor in most cases is precluded from raising defenses to the original debt, since the "account stated" creates a new cause of action against the debtor based upon the debtor's admissions, which are established by the payment.
Sometime it is worth accepting a smaller payment on the account in order to obtain the admission, which will help you later on if a lawsuit has to be commenced.
William A. Rinehart
Rinehart, Scaffidi & Mathews
A: Clearly, a complete and thoroughly dated and executed credit application is of inestimable value for the protection of creditor's rights. Ideally, of course, the personal guarantee document should be executed as well. There are, of course, fine lines between credit applications that are necessary and in many cases indeed essential and those which are sales killers. Finding that fine line is of course the goal.
As regards the protection of the creditor's rights, where delaying created disputes occur, credit application fully executed constitutes an agreement in its four corners. Requiring ten days certified mail notice or Federal Express or at the very least, fax or e-mail notices of any disputes within ten days of delivery or rendering of services will go a long way in nipping in the bud any disputes which debtor may attempt to present. If such a provision in the agreement is not complied with, creditor's position is of course extremely strengthened.
One caveat I would interpose, and that is that creditors should be extremely careful about requiring disputes to be presented to arbitration. This is a bone of contention on which many practitioners disagree, but my view is that it only creates an impediment to practical litigation which often is preferential to, but as become, very costly arbitration, the fees for which have become honorous.
Roe, Taroff, Taitz & Portman
A: The paperwork that is necessary to best protect a creditor's rights against a debtor who is disputing a claim are as follows: a) any work order created for the particular service or product; b) invoice for the work performed or product provided; c) any delivery slip; d) any phone logs or computer records that may evidence that the debtor has not called and complained; and, e) any follow up correspondence with the debtor indicating that the service or product was provided and that they should notify the creditor if there is any problem. Time is typically against the debtor. If time passes and there is no complaint about the product and/or service, but the invoice is not getting paid, the conclusion is that they simply do not want to pay the bill and not that the product or service was defective.
Christopher D. Curzon
SMITH, GARDNER, SLUSKY, LAZER, POHREN & ROGERS, LLP
A: Unfortunately, if the debtor is just causing a delay in your right to payment then the paperwork you have or don't have doesn't matter because the debtor already knows they received the product and owe the money. The debtor has made a decision that they no longer value your relationship because they are disputing claims just to delay payment. In this situation, you no longer have a client, you have an ex client who is withholding your money. This matter should immediately be escalated because if they aren't paying you they probably aren't paying other vendors and the squeaky wheel gets the grease. Regarding what documentation is most helpful when a case is forced to trial, obviously the more the better. You can have a great relationship with your client and still have complete documentation; It's always too late when your owed money and you find your documentation is deficient. If you took the time to include a question in your credit application, you did it for a reason and your client should answer all questions. Don't let the excitement of new business blind you to the possibility that you may need this documentation in the future. Credit apps, purchase order, shipping orders, invoices are all critically important when an agent or attorney has to protect your rights. Documentation, documentation, documentation.
H. Joshua Chaet
Chaet Geleerd LLP
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