How the Coronavirus Outbreak Will Affect Debt Collection

A photo of handwashing to represent coronavirus and debt collection.No doubt you have already felt the effect of coronavirus on your business. As the virus spreads across the U.S., things are coming to a quick slowdown. Understanding how the coronavirus outbreak will affect your debt collection claims will help manage your expectations of recovery.

How the Coronavirus Outbreak Will Affect the Courts

Beginning March 16 at 5 p.m. the courts will postpone all “non-essential” services. The following changes will likely impact your civil suits and ability to recover money and property: 

  • Civil matters, other than the Supreme Court, will proceed as the Court allows. 
  • Only pending civil and criminal trials will be held: No cases will proceed until further notice.
  • Eviction proceedings and pending eviction orders will be suspended.

As of now, it is in the civil court’s discretion if it wants to accept the filing of new civil cases, including debt collection cases. 

The lower courts in New York City haven’t implemented electronic filing. Therefore, all pleadings, motions, affidavits, applications for judgments, and more are submitted to the court on paper. Court clerks are required for intake and processing. Unlike the lower courts, almost all of the New York State Supreme Courts have mandatory electronic filing for debt collection claims, meaning claims can still be filed.

Our Predictions for How Coronavirus Will Affect Debt Collection

Because of the number of businesses that will now pay slower or not pay, expect an increase in the number of cases filed.

Although you will be able to file your case, it is doubtful that the Courts will allow defaults to be taken. Based on experience, through 9/11 and Hurricane Sandy, the court will likely suspend granting “defaults” for a period of time. Attorneys and parties who fail to appear to defend a case may no longer be “defaulted,” meaning a creditor will not be permitted to automatically win their case because of a non-appearance by their adversary. Rather than grant a default, the Courts would continue the case.

However, once things start up again, the cases will be taken in turn, those who filed first will be at the beginning of the line rather than the end. 

For the time, conferences formerly requiring live appearances have switched over to phone conferences allowing cases to move along the process, Well, up to a point, given no trials will be scheduled. We expect mediations and arbitrations to be held by phone, or video calls like Zoom or Skype.

All of this will extend the shelf life of a case. Creditors who are owed money should not delay. If you are owed money, you should move swiftly. Be proactive and collect your receivables immediately. Approach customers to request payment. You can consider settlement or a percentage of what’s owed to increase your immediate cash flow. 

If that is not possible, file suit immediately, invoke the mediation or arbitration clause. Don’t wait until it’s too late. 

For guidance specific to your businsess’ needs, contact Frank, Frank, Goldstein and Nager.

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