Over the past few years, there has been a marked increase in the number of debt collection lawsuits filed in the civil courts in New York City. Even if you’re not filing debt collection cases, the rise can still affect you.
New York’s civil court is the city’s lower court. Creditors can sue for balance up to $25,000 on the condition that one of the parties is located in or the cause of action occurred in one of the five New York’s boroughs — Manhattan, The Bronx, Brooklyn, Queens, and Staten Island.
According to The Wall Street Journal, debt collection filings in New York rose by 61 percent in 2017 and 32 percent in 2018. That increase comes at a time when U.S. household debt is at record levels. The number of defaults for credit cards and auto and student loans is up, and there has been a significant increase in the debt buying industry.
The graph illustrates the sharp rise in debt collection filings in the past three years.
The number of filings in 2018 may be about one-third of the volume of cases as a decade prior, but the graph shows that figures are about comparable to 2012.
That spike in the number of debt collection filings suggests many face a rough time in the near figure.
Why More Debt Collection Cases Is a Troublesome Trend
An increase in the number of New York City debt collection cases means an increase in the number of companies and people not paying their debts. On top of that, the marked increase in the number of people not paying will result in an increase in aged receivables for the business that transacted business with the non-paying client. The impact of an increase in aged receivables could mean a drop in cash flow and additional difficulties in finding financing from lenders. That decrease in cash flow will make it more difficult to purchase goods and services because of a decrease in creditworthiness
Take a lesson from 2008 — the height of the financial crisis. Unless your business is recession-proof, and most are not, today’s period of relative financial prosperity is a good time to tighten up your credit policies, terms, and collections. You should try to be more diligent in requiring companies to adhere to your credit terms, paying retainers upfront and acting quickly when things don’t go so well.
If you need help reviewing your policies and want to pursue payment from a non-paying company, contact FFGN for a consultation.