In years gone by, a common torture was to slowly bleed a person until they died. . . Therefore, if blood is to the body what a customer is to a business how many drips can a business suffer before it dies?
PICB HELPS STOP THE BLEEDING!!!
ORIGINAL ARTWORK BY MARC.ART, INC.
ASK AN ATTORNEY
: How can Universal Commercial Code (UCC) filings impact my ability to get paid when an invoice comes due and what can I do to prevent, or diminish this problem?
A: If a company has several UCC liens filed against it and is not paying its debts as they become due, a non-secured creditor will likely be behind a secured creditor in terms of payment. We see this issue arise most often when a bank seeks to offset a garnishment because the bank has a seeks to offset a garnishment because the bank has a secured interest.
Before extending credit, we recommend reviewing financial records and performing a thorough credit review, including checking references. After performing this review, if the debtor has several UCC filings or if the creditor has any concerns regarding the viability of the business, we recommend obtaining personal guaranties from the owners of the business. If the owners are not willing to sing personal guaranties, than in itself is a red flag. With personal guaranties, even if the creditor ends up behind secured creditors or is not able to garnish certain bank accounts, the creditor has additional avenues for payment.
Manty & Associates
A: UCC filings typically mean that your customer has bank financing. When banks take security for a loan they take as much as they can get. Inventory, receivables, equipment, etc. A company in distress may have difficulty paying its bills as they come due. Unfortunately for the unsecured creditor, this can mean you do not get paid. We recently received a claim against a company that appeared to be operating normally. They failed to respond to our demands, and did not defend the law suit we filed. We later learned the reason they ignored our law suit and that of other creditors. Their secured creditor sold their loan to a third party at a discount since the value of the collateral, company assets, was less than the loan balance. This was an instance where the assets were sold; the company could continue to operate; and unsecured creditors receive nothing. There was several hundred thousand dollars of unsecured creditor claims that were left unpaid. Hard to believe but true.
It is difficult to prevent this from happening. Knowing your customers credit history, and whether there are secured creditors will go a long way toward helping you make an informed decision of whether to do business with them and on what terms. It is also vital to pursue bad debts as soon as it becomes obvious that they will not pay voluntarily. It may be the difference between getting paid, and a write-off.
Jay C. Scheinfield, Esquire
Upper Darby PA
A: First of all almost every company that you will deal with including multi-billion dollar companies have a UCC filing against them. That in itself does not mean that much. All companies need outside financing and the party providing the outside financing will require a UCC filing to protect their interest. More important than the UCC filing is any other legal activity involving your customer. Obviously, if there are other lawsuits, judgments, multiple UCC filings, or tax liens, this indicates that there may be financial difficulties. At that point further considerations must be made to decide whether to do business with that particular customer.
If there is a situation where the supplier of goods and services is selling a large piece of equipment which may have a superior position to that with the prior secured creditor. Statutes may be different in each state and you have to provide notice to the prior secured creditor in order to properly obtain a superior secured position. However, if the items that are provided do not have substantial value to you if taken back and resold, then this process is of little help.
The most obvious way of protecting yourself is doing a thorough check of a new customer or making regular follow ups on old customers that are having some issues with payment, and setting payment terms of payment in advance or COD. This is not practical in many cases but if it appears that you have a customer that has diminishing financial resources, losing that customer rather than supplying that customer and not being paid for your goods or services may be a better option. One thing the UCC filing may provide is the name of the customers bank. Sometimes if legal action is necessary and you pursue post judgment action including garnishment, the name of that bank can be helpful in trying to collect the account. The bottom line is a UCC filing itself is not unusual but other activity such as tax liens, judgments and other signs of non-payment of creditors is a red flag.
William A. Rinehart
Rinehart, Scaffidi & Mathews
A: Assuming the debtor isn't in default with the secured party, a UCC filing would not impact a creditor/vendor's ability to get paid from the debtor's assets. The superior rights don't vest without a default in the obligation for which the lien was given. Both the parties to that transaction would hope the issue would never come to pass.
However, if the debtor has also defaulted in it's obligation to the secured party, the secured party has rights superior to other persons in the designated debtor assets, if they have allowed the strict UCC filing rules. The security interest can be in "all" of debtor's assets, but some liens are only on designated assets, such as receivables or inventory.
If a UCC security lien claim is made, the party claiming the security lien is required to show that the collateral pledged would be impaired by the creditor/vendor's claims.
Elliot M Portman
Roe Taroff Taitz & Portman
LET PICB HELP YOU BE AWARE!
COLLECTION SERVICES: PICB is the Graphic Art Industry's dedicated credit and collection agency. With more than 35 years of experience helping printers get paid from slow and non-paying customers our expertise will earn your respect and gain your trust. Our rates are below industry averages but our results are superior.
RESOURCES: PICB's web portal to government websites that provide real-time, free information that can be helpful when determining a customer's stability or viability. These sites provide users an ability to verify business registrations, civil records, lien information and much more.
DUE DILIGENCE REPORTS: When you don't have the time to review the information provided by the customer, PICB will do it for you. Our reports are compiled the old fashion way of 'hands on' extensive research while using the 21st century tools to maximize results.
RISKEE BUSINESS: PICB's free service that provides unlimited access into our extensive database to determine if a potential customer is already known to PICB.
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RODD MURPHY & ASSOCIATES
RON CARTER DBA
SOUTH STREET JOURNAL
RUMORS ON GRAND INC. A DISSOLVED CORP & KATHLEEN M VOGT AKA KATHLEEN TEWS
SANDESH PUBLICATIONS, INC.
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