What Happens When A Commercial Collection Agency Decides to File A Litigation?

Debt collection- these two words are enough to give you nightmares if you’re a business owner! More so because debt recovery can get really tricky if the debtor party starts to delay the payments.

It is, therefore, to the main a rule of thumb for business owners to hire a commercial debt collection agency to streamline the recovery process. However, do you know what happens when a recovery agency decides to file a litigation?

Let’s explore this blog till the end, and find out!

What Is Commercial Debt Litigation?

Before we plunge in too deep, let’s understand what commercial debt litigation means!

So, commercial debt litigation is a procedure that allows the creditor party (or commercial collection agency) to pursue legal steps to successfully recover their overdue.

But is it a part of the collection process? Well, yes it is. But, it’s also one of the very last resorts that can help creditors recover their dues from delinquent debtors.

For instance, a professional credit collection agency will first try out varied ways to establish communication with the debtor party, to get the overdue recovered. They will communicate over calls or messages; send demand letters/ reminders; and try to come to negotiations with the debtor party.

Now, if the debtor party totally refuses to respond, or tends to delay payments continually, the agency will have no other choice but to file a litigation! And that’s exactly how a majority of commercial debt cases move to court.

An Overview of the Legal Process For Collection Agency

Now that you know what commercial debt litigation means, let’s take a look at what the legal process involves.

At first, the creditor party, or a collection agency in Houston submits a formal complaint to the court. This complaint shall include the details of the unpaid debt and the attempts that have been made for its recovery. The moment a lawsuit is filed, the debtor party gets a summons and a complaint regarding their delinquency, which states that legal proceedings have been started against them.

The success of debt collection litigations depends on the documentation! The creditor party must possess clear records of the debt, and must also have proof about the debtor’s obligations to pay that debt. So, the creditor shall have to present essential documentation like signed contracts, and written texts to the debtor regarding payment agreements, invoices, etc.

Remember that the court offers judgments based on cold, hard, strong evidence. Therefore, when the best commercial collection agencies like Nelson Cooper & Ortiz, LLC opt for litigation, they make sure to properly keep the records of the case with them.

What’s the Role of the Statute of Limitations in this Process?

When it comes to commercial debt litigation, the statute of limitations plays a crucial role in setting the timeframe of the lawsuit.

The Statute of Limitations is basically a legal time limit, within which a creditor party is free to sue the debtor party. And the best part about this is that these statutes vary by state!

For instance, the statute of limitations for debt collection in Texas is four years from the date of the last payment or acknowledgment of the debt. So, if the creditor party decides to file for litigation against the debtor in the fifth year, they might lose their right to pursue the case!

And that’s exactly why you need the assistance of professional collection companies in Texas. They are aware of the state-wide statutes; can help you determine if a case is still eligible for litigation; and can also guide you to take the next steps to proceed with the case in court.

What Are Possible Outcomes?

There are infinite possible outcomes that can occur if a commercial debt case litigation has been filed!

• If a debtor hasn’t responded to the summons, or complaint, or fails to appear in court on the chosen date, the judgment will go in favor of the creditor party. On top of that, the creditor gets the legal authority to collect their overdue through liens or seizing a portion of the debtor’s income.

• If the case goes to trial, the court will deliver an order that shall include the debtor’s obligations to pay, and the details of any applicable penalties.

• In some cases, commercial debt litigation doesn’t even proceed to trial! Both the creditor and the debtor party reach a settlement before the court passes any further judgment. This allows the debtors to get free of liabilities without having to experience any legal consequences.

Wrapping It Up

Debt collection is a complex thing. However, dealing with commercial debt litigation is even more complicated! And that’s solely because court proceedings take a lot of time, and involve continual expenses.

Hence, when the best collection agencies for small businesses decide to file litigation, that means the matter has turned out to be serious. So, make sure to keep all the documentation ready to move ahead in your quest for a successful recovery!