There are times when you will choose to transfer a receivable to another. In order to do so, you will need to execute an assignment of account. Deciding to assign the account to another will impact your rights to be paid and your ability to attempt collection.
Our client, a hosiery manufacturer assigned his claim to a factor as part of a financing agreement. No payment was received by the factor from the customer. The client, wanting to be paid contacted our office.
The client authorized a suit against their non-paying customer to collect the balance. The action was defended by the non-paying customer. The non-paying customer, knowing that the accounts had been assigned to a factor, asserted a defense that the client did not have a legal right to collect the monies owed and the case should be dismissed as a matter of law.
Unless the assignment was conditional and/or the bad debt is charged back to the hosiery client, the non-paying customer (now defendant) is correct. The hosiery manufacturer does not have a legal right to pursue collection of the account.
Merely having assigned an account to another does not necessarily mean that you lose your interest in the receivable. The proceeds of any collection may or may not be shared with you, the original creditor, depending upon the underlying agreement.
The Black’s Law Dictionary definition of an “Assignment of account” is “the transfer of money by the debtor to the assignee when money becomes available to do so.”
Assigning an account includes, most often, assigning your rights to pursue collection of the receivable. You will not be able to pursue debt collection unless the underlying agreement allows or requires you to do so.
Your duty to support collection of the assigned receivable will vary based upon the underlying agreement. You may be required to authorize and proceed with legal action to collect the debt or you may be required to cooperate in the collection of the receivable to produce records or provide testimony by affidavit or live testimony at deposition and /or trial.
If you are owed monies and wish to collect monies owed you, contact FFGN for a free consultation. We have the experience that pays……
Your rights and requirements depends upon your agreement with the assignee.