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How to Handle Commercial Debt Collection

What is Commercial Debt?

Commercial debt is any debt owed by a commercial venture or business. Unlike consumer debt, commercial debt is used to fund business expenses, asset acquisition and improvements. It is common for businesses to accumulate a great deal of commercial debt when first starting out. Rather than declare bankruptcy, commercial debt counseling, commercial debt consolidation, and commercial debt settlement are alternatives for businesses struggling with debt that is past due. If your business is struggling to repay commercial debt, the attorneys at McCarthy Law can help you restructure your business debts. By negotiating with your creditors to eliminate a portion of your debt, we can help you to work out a manageable repayment plan.

How Commercial Debt Collection Agencies Work

When a business has an outstanding debt and payment is past due, the original creditor will attempt to obtain payment before sending the account to collections. Typically, if a business does not pay within 90-120 days, the creditor has three options: assign, sue, or sell the debt to a commercial debt collection agency. Assign, meaning the creditor may have an agreement with a third party and that the third party has the right to collect on behalf of the original creditor, or it can mean that they have the right to actually keep and collect payment on the debt versus just collect​.

Commercial debt collection agencies that buy debts owed by businesses to creditors do so at a fraction of the amount actually owed and then take it upon themselves to track down the business and collect the debt. Because debt collection agencies only make money if the debtor actually pays, they are notoriously aggressive. The agency will attempt to contact the debtor through phone and mail. If the agency does not receive payment after repeated attempts at contacting the debtor, it may file a lawsuit. If a commercial debt collector is pursuing your business, the lawyers at McCarthy Law can help you settle the debt for a fraction of the balance allegedly owed.

The Standards Commercial Debt Collection Agencies Must Abide By

The Fair Debt Collection Practices Act (FDCPA) protects consumers with outstanding debts by prohibiting debt collectors from harassing debtors. Unfortunately, the FDCPA does not apply to commercial debt collectors. This is not to say, however, that the activities of commercial debt collection agents are not subject to regulation. The Commercial Collection Agency Association (CCAA) is responsible for supervising the activities of commercial debt collectors. In order to become a certified member of the CCAA, firms must abide by high standards of practice and uphold strong ethics. In addition, many states have licensing requirements for commercial collection firms. In order to obtain a license, the firm must submit an application, purchase a bond, and pay a licensing fee. The licenses must be renewed either every year or every other year. Arizona is one such state that has enacted licensing statutes – pursuant to these statutes the government periodically conducts audits of collection firms licensed in the state. The attorneys at McCarthy Law are familiar with commercial debt collection laws and can easily recognize violations of the law.

Reducing Your Commercial Debt

Because your original creditor makes only pennies on the dollar if it chooses to sell your debt to a collection agency, they are often willing to negotiate a reduced payment amount before sending your debt to the collection pipeline. Note, however, that no creditor is legally obligated to agree to negotiate a reduced amount. Nevertheless, it is often beneficial for creditors to do so.

Negotiations often begin when the debtor (or debtor’s attorney) makes an offer that reflects what he/she can realistically afford to pay. Obviously, a creditor is more likely to accept settlement offers that are close to the original amount owed. However, creditors have been known to accept only a small fraction of the outstanding loan. Of course, negotiations can be tricky and consequently it is often advisable to seek professional representation in the matter. Our debt settlement attorneys have years of experience working with creditors. Because we represent debtors and go against creditors every day, we know which creditors are likely to negotiate and what amount a debt should settle for. We also have a good idea of whether a particular creditor is likely to sue or not. Chances are, we’ve dealt with your creditor before.

If your business is struggling with commercial debt call the lawyers at McCarthy Law today. We will work with your creditors to workout a manageable repayment plan that is satisfactory for all. Free consultation with an attorney.

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