When in Doubt, Follow the FDCPA

What is the FDCPA, and how can it help you as a debt collector?

Even if you’re not a third-party debt collector, following all the requirements of the Fair Debt Collections Practices Act (FDCPA) can help you avoid violating state laws, some of which impose similar restrictions on all debt collectors.

Commercial debts are not subject to the FDCPA, so generally you’re not restricted by those laws while collecting against commercial debtors. You must still be careful though, because sometimes it’s not immediately clear which debts are commercial and which are for personal or household use. Also, the trend among states is to extend protection against debt collection to all debtors, regardless of the nature of the debt.

It’s wise to follow the FDCPA requirements even when collecting commercial debts. Although following the FDCPA can protect you if you mistakenly believe a personal debt is commercial or when state law is broader than federal law, you’re doing more than following the adage of “better safe than sorry.” For the most part, the provisions of the FDCPA are consistent with good collections practices. They help define and justify collections procedures that can keep your operations both professional and ethical.

Read more in this month’s article.

Get Help from Michigan Debt Collection Services

Have questions about collecting debt, or ready to file a claim? Whatever part of the process you’re at, reach out our Michigan debt collection services at (248) 645-2440 or submit a contact form here.

Play by the Rules when Collecting Debt

What’s the best way to cover your bases when talking to a debtor?

When you work with consumer debtors, you should assume that the debtors are fully aware of their rights and are secretly looking for a way to sue you for violating those rights. Work from the expectation that your debtor is sophisticated:

• Assume that the debtor is keeping notes every bit as good as yours, maybe better. Assume that their records will include dates and times of any phone calls, whether you’re calling at inappropriate times or in a highly repetitive manner (for example, ten calls in a single day), and whether you’ve violated restrictions on communications with third parties, such as their employer.
• If the debtor requests verification of a debt, provide it. Supply the contracts, invoices, and statements underlying the debt. If they request them again, provide them again (and again, and again).
• Make sure that you provide accurate balances for debts. Don’t charge any unauthorized fees or interest rates beyond those permitted by your contract or state law.

Read more in this month’s article.

Get Help from Michigan Debt Collection Services

Have questions about collecting debt, or ready to file a claim? Whatever part of the process you’re at, reach out our Michigan debt collection services at (248) 645-2440 or submit a contact form here.

Outlining Entity Liability

Why is it important to understand what kind of entity you’re lending to?

In the last blog, we discussed five common legal entities you’ll come across when lending credit. Now, we’re going to outline the level of liability for each entity:

• Individual and personal guarantors: A person who applies for credit, or who signs a personal guaranty of payment for another entity, should be evaluated for credit purposes based upon their personal assets and income. In the event of default on the debt, they are personally liable.
• Proprietorships: The owner of a proprietorship is personally liable for any default on credit terms extended. A proprietor is the owner, and the business isn’t a separate legal entity.
• Partnerships: The owners of a general partnership are personally liable for money owed. Although the partnership entity is a legal entity that may stand alone financially, the general partners (owners) are personally liable to you.
• Corporations: When you sell to a corporation, only the corporation is liable for your debt. The shareholders only become personally liable if they sign a personal guaranty. Exercise extreme caution when extending credit to a corporation.
• Other Legal Entities: State laws allow for a wide variety of legal entities and, as you process credit applications, over time you’ll probably encounter most of them. You may encounter joint ventures, a cooperative venture between two or more legal entities, or the professional limited liability company (PLLC). To protect yourself, evaluate these entities in the same way you would evaluate a corporation.

Need Help from Michigan Collection Services?

No matter what entity you’re dealing with, if they’re not paying, we can help you collect. With our firm, you get a comprehensive package of Michigan-based collection services, including international debt and judgement collection. If you have questions or are ready to place a claim, call (248) 645-2440 or submit a contact form here.

Defining Legal Entities

What counts as a legal entity when lending money?

When it comes to credit lending, there are five common legal entities:

• Sole Proprietorship: A business owned and operated by an individual, without limited liability or any of the other features of a corporation.
• General Partnership: A business entity where the owners share personal liability for the debts and obligations of the business.
• Limited Partnership: A form of partnership with general partners, who manage the partnership and are personally liable for its debts, and silent partners, whose liability is limited to the value of their interest in the partnership.
• Corporation: An artificial entity or “legal person” that under normal circumstances shields its owners from liability for its debts. 
• Limited Liability Company (LLC): An entity similar to a corporation that ordinarily shields its owners (usually called members) from liability for the debts of their business.

In addition to the liabilities described for proprietors and general partners, personal liability may also arise in the context of other legal entities. For example, an individual may become liable by:

• Signing a personal guaranty or suretyship agreement.
• Managing a business as a member of a limited liability company on the very rare occasion that the documents creating the LLC require personal liability.
• Continuing to run a corporation that has been automatically dissolved by the state.
• Making purchases on behalf of a company that has not yet incorporated.
• Commingling personal money with business money or thinly capitalizing the business from the start.

Need Help from Michigan Collection Services?

No matter what entity you’re dealing with, if they’re not paying, we can help you collect. With our firm, you get a comprehensive package of Michigan-based collection services, including international debt and judgement collection. If you have questions or are ready to place a claim, call (248) 645-2440 or submit a contact form here.

The Importance of Customer Details

Why is it important to know your customer in detail?

When you extend credit, the type of legal entity you’re extending credit to is key to determining how much credit to grant. From a collection standpoint, there’s a huge difference between lending to an individual, sole proprietorship, corporation, or limited liability company. Many business entities, including corporations, provide a significant shield against collections, allowing their owners or shareholders to avoid any personal responsibility for their unpaid debts.

When you evaluate credit applicants, always require a formal credit application. The information your customer provides on its application makes it clear who the applicant is and the nature of the legal entity involved, which, along with other vital information from the credit application, allows you to properly evaluate the prospect. If the customer refuses to take the time to fill out your credit application from, your credit policy should require you or your designee to contact the customer by phone or in person to obtain that information. You can complete the application form yourself and then have the customer verify, sign, and return the form or acknowledge its accuracy in writing. Even an email acknowledgement is fine.

Learn More with Michigan Collection Services

Don’t be afraid to talk to a collections lawyer! The Muller Law Firm can answer questions about any part of the collections process. If you need help with debt collections located in Michigan, call (248) 645-2440 or submit a contact form here.

Know Before You Lend

What does your credit lending process look like?

Before extending credit, you should know what type of legal “entity” your customer has chosen. Identifying your customer is just as important as knowing how long the customer has been in business, how much credit they’re requesting, who they’re purchasing from (“trade references”), and who they’re banking with. Generally speaking, with the notable exception of sole proprietorships (where the business and owner are one and the same), a legal entity may:

1. Have separate assets owned in its name
2. Sue and be sued in its own entity name
3. Insulate its owners from personal liability (except for the general partners of a regular or limited partnership)

Find out the differences in the legal entities you’re selling to so you avoid any misunderstandings as to who owes you the payment. Then make sure you’re extending credit to an entity you actually want to have credit terms.

Learn More with Michigan Collection Services

Don’t be afraid to talk to a collections lawyer! The Muller Law Firm can answer questions about any part of the collections process. If you need help with debt collections located in Michigan, call (248) 645-2440 or submit a contact form here.

A Paper Trail Story

Did you know that proper documentation can save you a whole lot of legal trouble?

Here’s an example: a customer buys $500 of paper plates. The customer received the $500 shipment, but $100 of the product was damaged. Your contract places risk of loss on the customer, so under the terms of sale, it’s the customer’s responsibility to file a claim with the carrier.

But what if it’s determined that the damage was done before the goods left your warehouse and the carrier isn’t at fault? Now you owe your customer a $100 credit. The credit memo should be issued immediately, should specifically refer to the soiled plates, and should include the amount, be dated, and be promptly entered into your billing system. Both the $500 invoice and the $100 credit memo will appear on the customer’s monthly statement.

Now let’s add a complication. During the same billing period, the customer either took an unearned discount or otherwise failed to pay an invoice in full. For example, a prior shipment of plates for $500 resulted in a check for $400. As with the credit memo for money you’re crediting to your customer’s account, you must promptly prepare and process a debit memo showing that $100 shortage so your customer knows exactly where it stands. Your paperwork remains accurate and organized, and you can document every entry on the customer’s statement of account.

Let Us Handle Your Michigan Debt Collections

Since 1961, our top-rated lawyers have been dedicated to ethically pursuing the money you’re owed. With offices in Birmingham and Grand Rapids, we handle claims against debtors located in Michigan, even if you are located out of state or out of the country. Let us take on the stress of your Michigan debt collections! Call (248) 645-2440 or submit a contact form for an effective resolution to your collection matters.

Put Everything in Writing

How thoroughly do you document transactions with your clients?

An old expression, always applicable to billing practices, states, “It isn’t done if it isn’t in writing.” Everything in the billing system must be in writing. This is usually referred to as a paper trail. As a general rule, whoever has the best paper trail wins.

Never include an item on your statement of account that can’t be fully documented. Unexplained items on statements are difficult to impossible to enforce and make your billing system appear disorganized. Your disorganization or lack of documentation will become a huge problem should a customer dispute its balance. As time passes, memories fade and you’ll have to rely on your paper trail.

Let Us Handle Your Michigan Debt Collections

Since 1961, our top-rated lawyers have been dedicated to ethically pursuing the money you’re owed. With offices in Birmingham and Grand Rapids, we handle claims against debtors located in Michigan, even if you are located out of state or out of the country. Let us take on the stress of your Michigan debt collections! Call (248) 645-2440 or submit a contact form for an effective resolution to your collection matters.

Voluntary vs Involuntary Bankruptcy

Do you know the difference between voluntary and involuntary bankruptcy?

Some bankruptcies are filed by creditors who gang up on the debtor when payments to those creditors are substantially delinquent. This is referred to as an “involuntary petition.” On the other hand, when the debtor files a petition for bankruptcy, that’s considered “voluntary.” Involuntary bankruptcy can occur under Chapters 7 and 11, but not under Chapter 13.

If you need a summary of Chapters 7, 11, and 13 of bankruptcy, read the latest Learn More article on our website.

Navigate Debtor Bankruptcy with Collection Services in Michigan

Is your debtor filing for bankruptcy?

Since 1961, our top-rated lawyers have been dedicated to ethically pursuing the money you’re owed. With offices in Birmingham and Grand Rapids, we handle claims against debtors located in Michigan, even if you are located out of state or out of the country. To protect your creditors’ rights, make use of our collection services in Michigan! Call (248) 645-2440 or submit a contact form for an effective resolution to your collection matters.

Three Common Bankruptcy Chapters

Are you familiar with the three most common types of bankruptcy?

The most common “chapters” (or types) in bankruptcy are Chapters 7, 11, and 13. A simple explanation of each chapter follows:

Chapter 7, straight liquidation: In a chapter 7 bankruptcy, the debtor’s assets are divided into two categories: exempt and nonexempt.

Chapter 11, business reorganization: Sometimes a business that’s in financial trouble will want to try to stay in business, rather than go through liquidation under Chapter 7.

Chapter 13, wage earner bankruptcy: This form of bankruptcy is similar to a Chapter 11 reorganization but is limited to wage earners or nonbusiness entities.

Navigate Debtor Bankruptcy with Collection Services in Michigan

Is your debtor filing for bankruptcy?

Since 1961, our top-rated lawyers have been dedicated to ethically pursuing the money you’re owed. With offices in Birmingham and Grand Rapids, we handle claims against debtors located in Michigan, even if you are located out of state or out of the country. To protect your creditors’ rights, make use of our collection services in Michigan! Call (248) 645-2440 or submit a contact form for an effective resolution to your collection matters.

Is Your Debt Collection Lawsuit Being Contested?

Waiting for your defendant to answer your lawsuit?

If the defendant files an answer to your lawsuit, the court clerk places the case on the court’s trial docket. You receive a copy of the answer either from the civil clerk or directly from the defendant.

Even if the defendant starts out by contesting the case and denying your claim for payment, he or she can pay you off and obtain a dismissal or propose a partial settlement or repayment agreement at any point along the way. To facilitate a settlement, some courts can provide a standard order for installment payments that you may complete and file to settle your case.

Learn more!

Take the First Step! Contact an Attorney for Debt Recovery in Michigan Today!

If you need the help of an attorney for debt collection in Michigan your first step is easy! Fill out the information form on our “Contact Us” page, or give us a call at 248-645-2440, to ask questions and figure out your next steps. We offer a free consultation and strategy meeting, no fees unless you win! Don’t let the money owed to you go away – get started today! We look forward to hearing from you.