Checklists Civil Litigation Legal Topics New Lawyers

What to Check Before You Collect

checklist_166429067A debt collection case comes your way, but should you take it?

There are many issues involved in debt collection that will influence your decision whether to handle a particular debt collection case.

First, assess the case by asking:

  • What is the type of debt?
  • Is the debt evidenced by a written instrument?
  • Is the debt secured by real or personal property and, if so, what is the type of property and where is it located?
  • Is the debtor an entity, such as a business, or an individual person?
  • Has the debtor petitioned for bankruptcy or is the debtor otherwise known to be insolvent?
  • Has any demand for payment been made on the debtor and, if so, when and by whom?
  • When did the debt become due and is there an applicable statute of limitations period?
  • Has there been any litigation on the debt and, if so, has there been a judgment rendered?
  • Will the overall benefit to the client in collecting the debt exceed the legal costs required in the collection process?

Next, if your assessment indicates that you should move forward with the debtor collection case, you’ll need to correctly identify the debtor. There are many sources to confirm the correct name and legal capacity of a potential defendant. If you can’t do this, you can’t take the case.

Finally, you’ll need to determine the viability of the claim against the debtor. This means you should consider

  • the age of the claim,
  • any applicable statute of limitations,
  • the status of the claim, i.e., whether the debtor acknowledged the validity of the claim or if it’s in dispute,
  • the debtor’s solvency, and
  • how much it will cost to collect.

If, after considering all of the above, collecting the debt seems viable, then go for it—as long as you have the professional competence to handle a debt collection case. Even for attorneys who regularly handle debt collection matters, there are cases in which a competency issue may arise, e.g., attorneys who generally handle only commercial matters may not be competent to handle retail matters and vice versa.

CEB’s California Basic Practice Handbook, chap 16, gives you an excellent overview of collecting unsecured consumer and similar personal debts from a creditor’s (client’s) viewpoint, including the most common forms of enforcement measures once you’ve got a judgment on a debt.

Want to go deeper into debt collection issues? CEB has you covered with its comprehensive practice guide, Debt Collection Practice in California. Also check out CEB’s program Creditors’ Remedies and Debtors’ Rights, available On Demand.

Related CEB blog posts:

© The Regents of the University of California, 2013. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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