Your Client’s Name: A Key to Successful Commercial Debt Collection

download (2)Your customer’s “name” makes all the difference when it comes to getting paid on a commercial debt collection claim.  The way your client is “named” on the account   affects 1) the success of winning and converting your case into a judgment and 2) Your ultimate ability to seize assets to satisfy your judgment and get paid.

  1. Winning and converting your case into a judgment. Ascertain client’s corporate name and name them properly.

A terrific opportunity has presented itself. The customer (or seller) wants to work with you and make a deal.  Before establishing the account, sealing the deal and celebrating, make sure you verify the prospects name.  Confirm the customer’s name with the State that the customer is an active corporation.  Other inquiries should be made to confirm that the customer and has all of the necessary licenses to get the job done before moving forward.

Illustration

Our client made a deal to buyout a competitor.  The seller corporation would assign the current contracts it had with its clients and transfer the customer accounts to our client. Our client would service the customers and pay the seller a percentage of revenue earned on the accounts plus miscellaneous fees for three years. After the three years, our client was entitled to retain all revenue.

Client took over the accounts, serviced the client list, billed and received some of the payments.  Some of the payments mistakenly went to the seller.  The seller, receiving way more than “his share” of the profits refused to turn over the monies to client.

Client sued to recover their portion of the monies paid to the seller.

During our initial assessment and research of the claim we learned the following:

* At the time the deal was signed the seller was a dissolved corporation.  Therefore President of the company could not transfer or enter into a deal to sell, assign or transfer any assets belonging to the “corporation” because the corporation no longer existed.

* At the time the Seller signed contracts with their customers, the Seller did not maintain the necessary active trade licenses that were necessary to perform the work. Therefore the contracts, the asset client was buying, were questionable. .

From the outset, the dispute appeared to be a straight forward collection claim; non-payment of monies owed pursuant to a written contract of sale.  Because of client’s failure to verify Seller’s name and compliance with mandatory licensing requirements, the case involving fraud and deception, made the case much more complicated and clouded the issue of repayment.

As a result, the case will require lengthy litigation and a substantial delay in client obtain a ruling in their favor (and ultimately collection of their judgment).

  1. Seizing assets to satisfy your judgment and get paid. Your ability to enforce a judgment against a customer who was named incorrectly

Matching is the key when it comes to seizing assets to satisfy your judgment.   Banks and others holding assets belonging to your non-paying customer, will seize assets that match the name of the judgment debtor, your customer.   If the name on the account, property or other asset differs slightly, even by a word or one letter, the property will not be frozen.  As a result, you can not seize the property and get paid.

Illustration:

Our client had opened the customer account.   Goods were sold and invoiced to the customer.  Demand for payment was unsuccessful.  As a result, our client authorized suit, won their claim and received judgment in their favor.

Client had maintained banking information for the customer and once judgment was entered, we attempted to restrain the account.  The bank indicated that there was no account belonging to the judgment debtor.  How could that be?   When client received a copy of the check from the bank, they realized that the check was drawn on a corporate account with a different name.  The names were similar but clearly different*

Creditor’s have lost their ability to collect a commercial debt merely because they did not know a client’s correct corporate entity and wheter the customer was operating related corporations at the same location.   Among one or more of the customer’s businesses will help insure your ability to seize assets to satisfy your judgment.

Your rights as a creditor to get paid can hinge on your customer’s name.     For more information on protecting your rights as creditor, contact the FFGN jnager@ffgnesqs.com.  We can help maximize your chances of getting paid.

*  It should be noted that there are other ways to “correct” the name of the judgment debtor which require leave of Court and are left to a Judge’s discretion.

 

 

 

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