As a small business owner — whether a sole proprietor or a general partnership — your personal and business credit reports are closely linked in the eyes of financial institutions. Mistakes you make with your business credit will undoubtedly reflect in your personal credit report, which is why you must be vigilant about keeping track of both aspects of your financial situation. Far two many business owners fail to correctly balance their personal and business credit, which can lead to bankruptcy and other problems.
Small business owners must almost always personally guarantee any loans or lines of credit that they take out on behalf of the business. For example, let’s say that you need extra space for storage so you settle to hire a contractor to expand your office building. To fund this renovation, you lift out a business loan from your bank in the amount of $30,000, to be paid back over the next three years. Six months later, however, your business is floundering and you don’t have the cash to meet your obligation to the loan. Would you be surprised to find out that creditors will not only arrive after your business, but also you personally?
Balancing your personal and business credit isn’t difficult as long as you realize that they are inextricably linked. Each time you fail to make a payment on your business credit card, it can be reflected in your personal credit report as will as that of your business. So how do you keep from ruining your financial history in an anxiety to get your start-up business off the ground? All it really takes is a little time and financial management.
Use your personal and business credit cards separately. In order to balance your personal and business credit, you’ll need to keep them separate. When you construct a purchase for your business, make sure to use your business credit card. If you’re going to the grocery store to recall up dinner for the family, however, use your personal credit card. This will make banking — not to mention taxes — much easier to handle, and you’ll be better able to keep track of your cash flow for the business.
Carefully monitor your personal and business credit. There are credit monitoring services that charge a nominal fee each month to keep track of your credit report, which might be a good investment. You can also monitor your credit on your own by ordering copies of your credit reports every six months. This is to ensure that you know exactly what’s going on your personal and business credit reports; if you know, then you won’t have to concern.
Don’t personally guarantee business loans. Although you might not always be able to avoid it, try to stay away from financial lenders who require that you personally guarantee a loan made for business purposes. The better your business credit, the easier this will be, but you should definitely try and find lenders who are willing to give you a loan based on your business name only.
Sell your assets to conceal business loans. If you race into a cash flow problem, you might be left with no option other than to sell some of your assets to cover a business loan. It is vitally important that you meet your financial obligations with regard to your business; if you don’t, you might find yourself without a source for funding, which could mean the end of your entrepreneurial endeavors.
Keep meticulous records. Balancing your personal and business credit means keeping meticulous records. Keep files for both your personal and business financials and update them on a monthly basis. Sustain copies of your credit portray for future reference and don’t hesitate to call creditors if you mediate that their calculations are incorrect. Remember: Identity theft is not only a personal problem, but also an issue for businesses.
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Filed under Sole Proprietorship Bankruptcy by on Nov 9th, 2010. Comment. 
Alamo Rent A Car began their journey back in 1974 where they initially started with just four locations in Florida. Their goal was to create a niche market and grow, and they did unbiased that. They were the first of their kind to introduce unlimited free mileage to the car rental industry and focused their attention on leisure travelers who wanted a gargantuan experience at a crude cost. To say this concept worked would be an understatement. The company quickly took off and became one of the country’s largest providers of rental cars.
Throughout the 1980’s, Alamo Rent A Car continued to expand their business and began constructing rental plazas that could quickly and easily serve hundreds of customers every hour. The first rental plaza was constructed in Tampa, FL, in 1982, and the largest was built in Orlando, FL, in 1985, which is home to the world’s largest rental facility. Also in 1985, Alamo decreased the size of their rental agreement to the size of an airline ticket and introduced Instant Alamo which was a program that stored a renter’s personal information. Both of these changes were designed to make the rental process quicker and simpler for the leisure traveler.
During the 1990’s, Alamo Rent A Car made headlines when it introduced three-tiered collision damage waivers. They named them Waiver Savers and they were designed to cater to a renter’s specific insurance needs by giving them different price options and insurance coverage levels. Then again, in 1995, Alamo made headlines as the first of their kind to introduce real-time booking capabilities on the internet. Alamo.com continued to add more and more services to their website in the following years. Some examples include: weather forecasts, driving directions, things to do, Quicksilver membership club, etc. Then, in a surprise move in 1997, Alamo Rent A Car merged with National Car Rental. This was a great strategic move because National had their niche in the business world, and Alamo had theirs in the leisure world. Together, they covered a great spectrum.
Unfortunately, the success didn’t last for long and financial problems emerged in November of 2001 when the corporation filed for bankruptcy. However, the company was determined to get back on their feet and in 2002, Alamo and National began combining their brands at the major airports. In addition, Alamo forged a unique partnership with Disney and became the exclusive rental car company for the Walt Disney World Resort and the Disneyland Resort. Things were once again looking good for them.
Probably the biggest boost to the company came in 2007 when both National Car Rental and Alamo Rent A Car were purchased by the Taylor family. The Taylor family brought together Alamo, National, and Enterprise Rent-A-Car under the same umbrella, Enterprise Holdings Group where all three brands are continuing to see astronomical success. In regards to what’s next for this company, only time will tell.
To date, Alamo Rent A Car has locations throughout the United States, Canada, Europe, Mexico, the Caribbean, Latin America, Australia, and Asia. They operate in over 42 countries and have over 1,000 locations. They also forged an alliance with Europcar creating the largest worldwide car rental network.
To learn more about Alamo Rent A Car, National Car Rental, and Enterprise Rent-A-Car, along with their competitors, please visit: http://www.trix4travel.com/
References
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Filed under Sole Proprietorship Bankruptcy by on Nov 2nd, 2010. Comment.
Corporations are legal entities according to United States laws. They are allowed to buy and sell assets, hire and fire employees, and a host of other things. These businesses are incorporated in one state located within the United States and are chartered by the area or territory for tax purposes. There are two main types of corporations Sub-chapter S Corporation’s, or C Corporation’s. It is important to understand the advantage’s and disadvantage’s of a corporation before selecting it as your business structure.
There are many advantages when selecting a corporation as your business structure. A corporation is set to have mountainous advantages over the sole proprietorship or partnership structure. Corporations have almost unlimited access to financial capital because it may raise capital by selling stock, borrowing from banks, or by issuing bonds. As long as a corporation is financially stable, it has unlimited life. It is not forced into liquidating bankruptcy. Corporations can be transferred from one owner to another by selling a corporations stock, by gift, or by inheritance. Most owners enjoy the fact that they have limited liability. The corporation assumes all liability. All owners are required to invest $1000. Therefore, you can never lose more than your $1000 investment if your company were sued or ceased to exist.
With that being said, there are also many disadvantages. The first is annual audits by an independent, impartial, outside auditor, of which the corporation must cover the costs. You must file many forms and be in compliance with Federal laws that are only applied to corporations. The ownership of your corporation is widely held. The owners of the corporation are separate from the business and have little to no control over how the business is run on the daily basis. A board of directors is selected and they bear the responsibility of making decisions. However, from the financial point of view, double taxation is the biggest disadvantage. Corporations must pay Federal tax on its profits; then the corporation may distribute a share of its stocks back to the owner as a dividend. You can, however, avoid double taxation by putting your money into a private corporation that has received Sub-chapter S station from the IRS. Profits will still be distributed to stockholders, but as ordinary income, and the stockholder is responsible for paying taxes on the profits.
Now that you have the basics of a Corporation, make sure that you study further so that you can make this structure is fair for you.
More Business
Different Types of Corporations: Advantages and Disadvantages of Corporations
MoreBusiness.com
All Business
Advantages and Disadvantages of Forming a Corporation
Allbusiness.com
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Filed under Sole Proprietorship Bankruptcy by on Oct 30th, 2010. Comment.
The statue of liberty has an inscription on it that says something to the effect of give us your sick, your tired, your poor. This implies at least to me that America brings a lot of people hope and simply by arriving here in this country that great opportunity awaits anyone that works hard. When immigrants came to places like Ellis Island from economically dormant areas in Europe they viewed the icon that lady liberty and America as a whole as a beacon of prosperity, a land of milk and honey.
This view of America has always been true since our inception in 1776 despite some definite bumps in the road such as the barriers that were put up by issues such as the difficulties presented by the Articles of Confederation, the Great Depression, and the struggles for civil rights for all that we have encountered throughout our centuries as a nation. Through all this plight and unrest America has persevered and in many ways these problems that we have endured have indeed made the nation stronger.
To be perfectly honest though there are some serious tribulations that quiet could use some addressing in this country of ours that need to be confronted. One of these blemishes on our record is some of the gigantic poverty that still exists within our borders, in all pockets of the country. Don’t get me wrong, this is not a utopia and I realize that fact. To put a question to all poverty or even a majority of poverty to be extracted from this country is not realistic in any sense of the word. There will always be poverty to some extent on every corner of this nation.
Let me also go on to say that compared to many of the developed more socialistic nations such as France, England, and definitely communists like Cuba the United States does a far better job of taking care of those who are in the lower income scales, in other words the impoverished. So in no way am I calling for more government run programs, more centralized control over the economy coming from Washington or even any deviation from our recent market-consumer based supply and interrogate system. Looking at a private-public sector partnership that they currently have in Massachusetts order to address the healthcare conundrum may be a road we need to go down.
“The Other America” by Michael Harrington was originally published in 1962. To give a little background information on Harrington himself, some of the organizations that he aligned himself with included the Workers Defense League, the Center for the Study of Democratic Institutions and he was an active member of the Socialist Party of the United States till the day he died in 1987. Obviously Michael was on the fringe of the political spectrum if he was a member of the Socialist Party of the United States in my notion so to say that his viewpoints are “mainstream” theory would be a misnomer and I simply wanted to read this book and report on it in order to net a different perspective on poverty in the United States.
To say the least the statistics, facts, and figures presented in Harrington’s book are outdated and certainly skewed. However, many of the issues that are presented in this text such as the lack of affordable health coverage, the disappearing act that many of our “family farms” are doing, and the inaffordabillity for the elderly to have a secure retirement just to name a few collected ring true today.
Another reason this text was fascinating to me at least as a person with a disability and someone who receives Social Security on a monthly basis I always hear folks who begrudge “ample government” and “wasteful spending on welfare programs”. So it was interesting to get a different angle on whether these safety nets as I like l them really work and either help people survive economically or even help dig them out of poverty. It may have not been the best choice of reading to build because of Harrington’s obviously slanted belief to the left and big government, but his opinion seems like an educated one nonetheless.
“The Other America” also caught the attention of Lyndon Baines Johnson’s Administration and in some people’s eyes was the impetus for Johnson to declare a “War on Poverty.” Some of the agenda that Johnson implemented to help fight this war included Head Start, Medicare, Medicaid, and the creation of the department of Housing and Urban Development in order to produce housing more affordable for all Americans.
Harrington was actually brought in to be a part of a task force headed by Maria Shriver’s father in the 1960’s to postulate ideas on how to combat poverty. Harrington’s book albeit maybe a gigantic of an exaggeration or questionable in some areas of research at least gave Johnson and his economic advisers some numbers to discover at so they could at least get a feel for what they were dealing with.
Harrington makes the claim that at the time when he wrote this book there were 40 to 50 million citizens who live on this land. “They were bad and they still are.” (Harrington pg. 1) at the reprint of this in 1971. Now I detest to be a negative nelly and go after the first statistic he puts in here, but I think that number is somewhat misleading. The author himself later admits “I have been looking for stagnation and retrogression.” (Harrington pg. 175) The point that I am trying to produce is that data can and usually is manipulated to fit a certain point of view depending on the project and the prerogative of the writer. For me to question the veracity of Harrington’s research would be foolish on my fragment because I basically know nothing about conducting field research. The part that makes the most sense about the forty to fifty million people living in poverty at that time is that they have no standing within our society, no yelp within the political arena or community at all. Too often those in high places speak about the bad as if they understand, but it is no more then hollow rhetoric.
Harrington takes a compassionate and on the surface reasoned near to things like combating the lack of quality housing developments in America. He is highly critical of the approach of the government in 1949 when Republicans and Democrats came to the negotiating table and drew up a compromise in order to address the pressing issue of public housing. Conservative minded Senators like Bob Taft realized that there was an immense shortage of housing in the country, but the truth is no legislative undertaking in the history of all governments is perfect. There needs to be compromise when drafting a bill and a substantial part of that compromise had to deal with the restraints that the budgeting process can place on a project.
So when Taft and other budget hawks fell “100,000″ (Harrington pg. 34) short of their modern goal of houses built. Harrington however, forgets that money just doesn’t appear out of thin air and he is highly critical of people like Taft for showing some fiscal restraint. When President Kennedy vows to take up the project some twelve years later in 1961 and still falls short of Harrington’s expectations Harrington also speaks poorly of John Kennedy. This criticism is also unwarranted in my book because Kennedy had a lot on his plate following foreign affairs and trying to dig the country out of an economic recession.
Harrington unbiased simply takes the approach that if you give the poor housing this must mean that they will automatically take superb care of it and there will be no more slums in America. Let’s be perfectly just here, I contemplate we all know that most poor in America are often segregated from the more affluent people. What this means is that the awful live by one another and often times a kid growing up in that situation all they are going to see is struggle and strife. If that’s all the person sees in their life often times it’s hard to know how to get out of it. Poverty is cyclical, and for some it runs within a never ending cycle.
This all means that if your parents lived in a run-down old house, you are likely to live in a run down old house unless you are granted greater opportunity and take advantage of it through the educational process. I’m not taking a shot at the poor I’m simply making an observation upon human nature that we live what we know and peep.
Harrington opines and describes the different forms of poverty, he goes more in depth then I will because it seems easier to explain my blueprint. There are two kinds of poverty from a territorial standpoint in my view. There is island poverty which means that there is poverty in determined sections of a large city or area, but it’s pretty much condensed as far as its level of severity. Let’s take the District of Columbia as an example, there are droves of homeless people just mere feet away from the White House and they’ve been for decades on end.
If someone were to move just a few miles to say Northern Virginia you are going to find one of the most diverse and vibrant economies in the country with biotechnological research companies like VA Biotech (Flagg pg. 2) stationed there and computer companies like International Business Machine (Zucker pg. 4) also with its headquarters based out of there. The schools in Northern Virginia are spectacular and you’ll run into some very opulent housing. This is an example of island poverty to me. Where there is immense poverty in certain sections of a land mass, but the entire dwelling is not stricken with the complication. I guess you could say that Washington D.C. (the inner city especially) is on an island all to itself.
Then there is abject poverty which poisons an entire region for generations on end. The constituency that Harrington uses as an example that has been hemorrhaging jobs for generations is Appalachia, up there in the West Virginia-Eastern Kentucky zone of the nation. “Beauty can be a mask for ugliness.” (Harrington pg. 40) This is how Harrington describes the Appalachians. As people drive through and see all the beautiful scenery, say if they were on their vacation. The people out for stroll enjoying the backdrop and beautiful vista that the Appalachians can provide in spring or fall especially are completely oblivious to the struggle that the people living there have to work through. He then goes on to imply unjustly that most of these vacationers are care-free about the troubles of the unpleasant and fair want some pretty pictures along their journey.
He goes on to mention the “1,500,000 people who left the area during the decade of the 1950′”. (Harrington pg. 41) Harrington then goes into different reasons why people end up living in poverty. He talks about mental illness and how that could lead someone into unpredictability within the job market. This seems to me at least to be a rather obvious point given that if someone is suffering from a psychological ailment that they would potentially be less dependable as far as showing up to work or being able to do the job efficiently.
Then Harrington talks about how people who abuse alcohol would find themselves down at the shelter where he exercise to work because they often couldn’t keep their houses due to all the debt they’d accumulated from years of drinking. Obviously if your alcoholism gets bad enough to the point where you race into that much debt it must also inhibit you from maintaining a job and a decent standard of living. So although I have empathy for the drunks and the mentally impaired I think it is not surprising that these groups of people are living in poverty, not only wait on in the 1960’s and 1970’s, but also today.
One of the most intriguing issues that we deal with today is immigration, migrant workers, and the proliferation of corporate farms. When consumers in the United States spend an “average of 20 percent less of their income on food than any other nation in the world” (Harrington pg. 39) back then just imagine the abundance of food and the speed at which it can be produced nowadays through the use of mechanization. Of course with this industrialization and need for increased efficiency and profit margins there is a downside. Many of the smaller farmers are being forced off their land because they are unable to find a reasonable enough price for their cut.
These farmers are people who were raised on farming; they lack any other usable skill within this industrialized society, so thus they go from a farmer who makes a decent living to someone who becomes another number for the Department of Labor to put in a chart as living under the poverty line. Then with the integration of major free trade agreements into today’s economy such as the North American Free Trade Agreement farmers now have to also compete with overseas markets and once again they are unable to because of the extremely cheap labor in Mexico. I am not saying that free trade is a bad thing especially from a consumer point of opinion, but if you look at the socioeconomic it can have on both countries from a labor-manufacturing standpoint free trade is usually a negative.
The other side of this coin is of course the struggle of the migrant worker. Now you can debate on whether illegal immigrants should or shouldn’t be allowed in this country to perform even the most menial tasks at pathetic wages. There are reasonable compassionate people on both sides of that issue, but the one fact that no one can deny is the fact that yes, even illegal immigrants are human beings who should not have their human rights violated. Harrington believes the immigrants should have the right to unionize, but then basically admits that these workers are too nomadic in their lifestyle in order to build a sustainable worker’s rights program. Harrington basically is quite notable of American Federation of Labor-Congress of Industrial Organizations for not doing more to organize, but for Harrington to attack them is like punching your best friend as they try and help you out of a scrum in my opinion so I’m not quite sure why he so harshly critiques them.
Yes, there are a bunch unfavorable organized labor bosses, but sometimes you’ve got to slash deals with the devil so to speak to get where you want to go in life. However, Harrington once again sort of gives off the impression of naivety by basically saying if the unions just got their act together and played nice (as if that ever would happen) everything would be worthy better. Obviously also from a sociological aspect Harrington certainly employs a class conflict, semi-Marxist point of view by basically ridiculing America’s wealthy for not showing more compassion for the lower classes. In fact the class that Harrington focuses on most in the book is the underclass, those who cannot catch the means to afford the basic necessities of life. You could of course draw the comparison between Harrington and Marx and how Harrington also looks at the burgeroise with disdain and considers himself a champion of the proletariat as they fend off assaults on their way of life.
Harrington also goes into detail of the struggle of the elderly to survive in this society. This is a tussle that is discussed quite extensively by any sociologist worth their salt, no matter their philosophy on whether we as a nation have a responsibility to take care of our aging members. It does seem a little draconian to me to not want to help the people who left us with such a sizable country filled with so many opportunities. Harrington basically argues that we need to expand Social Security and increase benefits for folks who he says are in their “golden years.” Of course this was the late sixties through the seventies when he was espousing the ideas and we’ve reach to realize that with people living longer due to medical advances Social Security is on a collision course with bankruptcy without some reform. So, due to this expansion of benefits for anyone doesn’t seem plausible and many people should fair feel lucky for whatever pecuniary help they currently receive.
Even if Social Security were to open to default in a sense and lose some if not all of its solvency most mainstream social scientists and economists would agree that it certainly did help a lot of the elderly out of poverty to some extent, by giving them at least something to fall back on. According to many sources the poverty rate amongst those sixty five and older dropped somewhere near forty percent when Social Security was first implemented back in the 1930’s. This means that the poverty rate Harrington then goes on to argue that the elderly struggle financially through their golden years because they don’t accumulate out and socialize enough, build social contacts or “social capital” (Putnam pg. 15) as many sociologists like Robert D. Putnam put it.
They would use this social capital in order to build connections in order to stay out in the job market to supplement their income with. Although I also conclude that many of the elderly are somewhat secluded from the rest of the world, that’s simply not as true as Harrington makes it out to be. If you really think about it, it’s the elderly those who Tom Brokaw called “The Greatest Generation” who attend church services more regularly then those in their youth. To highlight the generational gap and to see if Harrington’s argument of reclusion holds up decades later we have to look at more recent data. According to the data level-headed by Robert Putnam in 2000 the weekly church attendance among high schoolers “has dropped from fifty two percent in the 1970’s (when Harrington was relevant) to forty percent as of 1999.” (Putnam pg. 75) In incompatibility church going amongst the elderly has only dropped five percentage points according to an aggregate percentage of surveys.
I’m not saying that church is the only social function that the elderly go to and since they go to church they must not be impoverished, but to say there is a growing disconnect between society and the elderly like Harrington says isn’t exactly suitable. In fact if you think about at least according to the data offered by Putnam it shows that the younger generation may have trouble digging their way out of a tough financial stretch if they don’t go to church and do those social networks.
Really, you can’t excuse Americans of not caring about the elderly either. Despite the fact that the sociology textbook basically implies that the more industrial a country gets the more it scorns the elderly. In some respects, this is true however America is a very giving group of people. This is a fact that Harrington of course conveniently for his hold argument to sound better. Well, as a polemic if you will I offer up the fact that “per capita income has risen seventy four percent in the United States since 1961″ (Putnam pg. 156) During this time our philanthropic efforts are still way ahead of the rest of the world so any perceived drop-off in charitable giving complained about by Harrington is basically invisible.
The next closest country in generosity would be some country in Europe. I know many countries probably deem so many here in America are greedy, slovenly, etc. Well, just sight at the billions Americans offered up in response to the tsunami in the Thailand-Southeast Asia status of the world.
To put it lightly I judge Americans are well aware of poverty. Far more aware then folks like Harrington give us credit for. Maybe incidents like Hurricane Katrina kind of woke us up and we will be more alert of the plight of others, but overall we do a pretty good job in my thought. Maybe the fact that Americans gave so noteworthy money to things like the tsunami and earthquake relief in Pakistan while people of all political viewed dropped the ball when it came to the response to the incident in Fresh Orleans shows that maybe we don’t pay enough attention to our maintain country and too much to the affairs of others. That’s unprejudiced one point of thought and I think that is pretty much all Harrington offers up when it comes to his book “The Other America” is honest one point of view and numbers can be shuffled around neatly in order to fit that perspective.
Works Cited
Flagg, Michael, and Michael S. Rosewald. “Va. Biotech Looks to Md. For Inspiration.” Washington Post 2 Dec. 2004, natl ed., sec. C: E01.
Harrington, Michael. The Other America: Poverty in the United States. 1962. 2nd ed. New York: MacMillan Publishing, 1971.
Putnam, Robert D. Bowling Alone. New York: Simon & Shuster, 2000.
Zucker, J., A. Demaid, and S. Ogden. “Access Enhancement Objects for data management in Smalltalk.” Computer Languages, Systems & Structures; 32.4 (Dec. 2005): 195-202.
Additional Resources
Flagg, Michael, and Michael S. Rosewald. “Va. Biotech Looks to Md. For Inspiration.” Washington Post 2 Dec. 2004, natl e
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Filed under Sole Proprietorship Bankruptcy by on Oct 27th, 2010. Comment.
You’ve done everything you’re supposed to do. You’ve held up your fraction of the bargain. You sent out an invoice at the first of the month. You sent a reminder two weeks later. You sent out an invoice the next month with “PAST DUE” stamped in red. You sent out another with “FINAL NOTICE”. You have sent dunning letters threatening collection agents and lawsuits. What now?
- Have you tried telephoning your debtor? The squeaky wheel gets the grease.
- Look at your contract. Did anybody co-sign with the debtor? Did anybody sign a guaranty of payment? It may be time to put the squeeze on them.
- Did one of your customers, friends or family refer this debtor to you? You could try to get them to intercede for you.
They’re unexcited not paying. Now what?
Caveat. The author is an attorney in the location of Kentucky. The information contained herein may differ from jurisdiction to jurisdiction. By providing this information, the author does not intend to originate an attorney-client relationship with the reader. The following is not legal or financial advice. If you have legal questions about any of the material presented below, please contact an attorney in your jurisdiction.
Skip Tracing
Is the mail coming back to you? You may need to do some skip tracing to find the guy. There are many options available to you for skip tracing. In the previous chapter, we discussed the importance of collecting information prior to extending credit. Having the name, address, SSN, date of birth, employment information and other identifiers will help you tremendously in skip tracing. If this only happens on occasion, try some of the simpler, less expensive alternatives first.
- In this high-tech world, it’s easy to ignore the obvious. Pick up the phone book and ogle if your debtor’s current address is listed. If you acquire a few dollars into skip tracing and realize you haven’t tried it, this can be a real forehead slap.
- Print “Address Correction Requested” on all of your billing envelopes. That way, if one of your debtors moves, the post office will notify you of the change of address. You will have to pay some postage for the service, but it beats losing the account.
- Ask the Post Office for Change of Address information. If you have an acceptable purpose (like collecting a debt) the Post office will provide change of address information on request. You will have to fill out a beget and send it to the post office servicing your debtor’s last address.
- Online databases. There are some online databases that provide information useful in tracking debtors. You have to certify that you have an acceptable purpose under the law to access this private information. Some of them are marvelous, and some of them are garbage. I use accurint.com. It seems to do pretty well.
- Investigators. Some of us are old enough to remember Jim Rockford, the private investigator from the Rockford Files. He charged his clients $200.00 a day plus expenses. Whenever I suggest an investigator to my clients, they panic, thinking about the costs. While investigators can be costly, they may be able to do some simple computerized skip tracing or track someone down on the phone for less than what you mediate. We will talk about process servers and special bailiffs later on. They will have resources available to track people down. That’s their job. Call around for prices.
Make Certain the Investment is Worth the Payoff.
When you’re tracking someone down, make positive that the cost and pain you spend is commensurate with the value of actually finding them. If the debt is low, or if the chances of collecting a penny from your debtor are low, don’t throw good money after bad.
A lot of times my clients will tell me, “It’s the principle of the thing”. It’s not. If you’re debtor isn’t paying you, let me assure you they know exactly what they’re doing. They either feel very guilty about not being able to pay you, or they don’t. Either way, trying to narrate them a lesson about paying their debts is an use in futility that would either be wholly unnecessary or lost on oblivious debtors.
Collection is about making oneself whole. It’s about protecting your business. It’s about realizing income from your efforts. It’s not about teaching a lesson. If you want to be a teacher, the wonderful teachers in our school systems could utilize an extra hand. If you want to hasten a business, you need to be aware of your costs as well as your income.
To Sue or Not To Sue
Many of my clients who hire me to collect an chronicle tell me that it’s imperative that they win. In reality, they have already lost before they ever came into my office. Any credit transaction is a gamble that your debtor will actually pay you for the suitable or service you sold to him. You have lost the gamble. The score is two to zip. Your client kept his money and whatever safe or service you have given to him. The game is over. Thanks for playing. A lawsuit is your challenge to a rematch.
But this rematch won’t be anything like the first game. You will have an uphill battle. You will have to file the lawsuit, pay the costs, find the debtor, have him served with process, and prove your case. And at the end, the best you can hope for is a tie score—you obtain paid for the value you have already given in the previous game. You may end up with less than a full point. Or you could lose again. Or you could utilize more money than you recover in the judgment.
So before you sue your client, you have to inspect at the fable and resolve if it’s worth the lawsuit. Look at:
- How much money is at stake?
- What are the chances of collecting it from this particular debtor?
- How complicated is the case? Will it involve multiple witnesses, depositions, and costly litigation, or will it likely be a default judgment for debtor’s failure to defend?
- Regardless of your chances at collection, do you want to build your debtors on notice that you will aggressively pursue collection of your accounts, even if it means that you pay more in costs and fees than what you eventually collect? How much impact will this aggressive attitude actually have on your debtors?
Judgment-Proof Blues
How many times have you heard a debtor tell you that you can’t squeeze blood from a turnip? “Come on over,” they say in desperation. “Take everything I have, because I don’t have anything. You’re welcome to look for yourself.” They’re trying to signal to you that they are judgment -proof; that even if you are 100% successful in your litigation, your judgment will be worthless because he has no income or assets with which to satisfy your judgment.
In this regard, debtors are usually prone to hyperbole. However, the concern is very real. You should look at your debtor and determine whether a lawsuit is really going to be worth your time and money.
Where does he work? What’s his work history like. If he has worked a minimum wage job for less than a year, then a wage garnishment is going to be ineffective. He’s likely to just hold up and move across the street to the next minimum wage job. If he has a 10 year service record for a local employer, a wage garnishment may be a real possibility.
What about property? Does he have proper estate that you could eventually put a judgment lien against? Does he have a number of cars, a boat, or other expensive property that you could put a lien against? Will he have money in the bank if you file a bank garnishment? When you’re collecting on a judgment, remember that much of your debtor’s property is going to be exempt from execution. A debtor of modest means will likely be able to keep his car, his house, and the contents of his house from creditors.
Who is in line before you? Does your debtor owe child support? Does your debtor owe taxes? Are there other lawsuits ahead of yours? Does he have any equity in his real estate, or is the mortgage debt equal to or more than the value of the property?
Finally, you may have all of your ducks in a row. You could win your lawsuit, file your lien, and commence with collection and the debtor could file for bankruptcy the next day. With a stout number of debtors, a bankruptcy will shut you down. Your debtor will likely get to maintain his assets and discharge your debt. And then the game is over.
Court Costs? What are Court Costs?
Whenever you do anything in the court system, you will bag a lot of hands being thrust into your pockets. You will have to pay a filing fee to the clerk. You may have to pay a sheriff or process server to serve your lawsuit on your debtor. In Kentucky, your debtor may also be served by certified mail. At the very least, you will incur those two costs when you file your lawsuit. These costs alone usually race over $100.00 and could approach $200.00 in some cases. If you are successful in your lawsuit, the court will award these costs back to you. You will then have to attempt to collect these costs, along with the judgment awarded.
Many collections cases in court result in default judgments. The debtor doesn’t defend the lawsuit, and the creditor is awarded judgment by default. In other cases, where the defendant defends the suit, you face other costs of litigation. These may include the cost of depositions, and copies of deposition transcripts. These can run into the hundreds of dollars. If you have to hire an expert witness, that could cost money. The case may be referred to a commissioner, a mediator, or a court-appointed expert. You might incur a fee from any of these people. Then there are costs of photocopies, postage, faxes, parking at the court house, and taking time away from your work to prosecute your case.
There is also the chance of escalating your disagreement with your debtor. Your debtor may file a counterclaim against you. Even if the counterclaim is bogus, you might still incur expense in addressing the claim. Debtors may lash out in other ways as well. They may badmouth you to your customers. Sometimes they will even effect a criminal complaint against creditors in retaliation for the lawsuit. Be careful.
I’m not trying to talk you out of suing to collect your accounts. I’m just trying to warn you of the potential costs. Think about this example:
Cheryl is a hard luck case. She really needs a widget, but she can’t qualify for credit. She asks you if she can have a widget, and make monthly payments. You say, sure. She stops after the second payment. You look at her spot and determine that it’s not worth suing her for. After a couple of strongly worded letters, you write it off. Meanwhile you are getting an influx of Cheryl’s friends coming into your store. Apparently, you have gotten the reputation for being “cool” in regard to accepting payments. She has told her friends that you will work out payment with them, and you won’t do anything if they simply stop paying. Business of this kind will send you to the poor house. You need to change your image. It may be advisable to sue Cheryl for collection of her account—even if you know she won’t ever satisfy the judgment. It’s probably better, however, to gather the reputation of getting paid up front on all transactions.
Attorney Fees:
“If we win the lawsuit, I can salvage the debtor to pay your fees back, right? ” That question always comes up from the creditors. As I stated in the previous chapter, recovery of attorneys fees is not normally awarded to the creditor, even if he prevails in his lawsuit. If your debtor hasn’t expressly agreed, in writing, to pay your attorney’s fee, you will have to pay that yourself. An attorney’s fee might be a quarter to a third of the value of the sage, give or take. That could be a pretty sizeable chunk.
In Kentucky, cases involving $1,500.00 or less can be brought into small claims court. You will not need a lawyer in Small Claims court. The pleadings are made on standard fill-in-the-blanks forms. The rules of procedure and evidence are relaxed, and the hearing is less formal. Watch “The People’s Court” or “Judge Judy” and you’ll accumulate the gist.
In many cases you can portray yourself in divisions other than Slight Claims. However, it is not advisable. While it is possible for a litigant to get up to hurry and learn the laws, rules and procedures necessary to rep a lawsuit, a failure to understand proper law and procedure could mean dismissal of your lawsuit or other sanctions. If you attempt to report yourself in court, you will be held to the same standard as members of the bar. Ignorance or inexperience will not be an excuse. The court won’t help you or advise you.
One not of caution: In small claims court in Kentucky, a representative of a corporation or limited liability may describe the company without an attorney. Outside of Small Claims court, that’s not the case.
Example: Mary is very intelligent. She took business courses in school, started her own business, filed incorporation papers, and build a successful business. She studied collection law, and is jubilant that she knows how to file a lawsuit, and successfully litigate. She files a lawsuit against one of her debtors in Circuit Court. There is no small claims division in the circuit court, but she is satisfied that she has met every procedural and technical requirement of the court. She is wrong. Even though she is the sole shareholder, officer, director and employee of her corporation, and even though the corporation is based in her home, it is level-headed an entity separate from Mary the individual. If Mary undertakes to represent her corporation, she is representing a client without having been admitted to the site Bar as a licensed attorney. Even though Mary thought she was doing everything suitable, her lawsuit could be dismissed, as it was improperly filed by a person who is not an attorney. In fact, Mary has technically committed the crime of practicing law without a license—although as a practical matter, the court will likely dismiss her lawsuit and tell her not to do it again.
Conclusion:
If your debtor won’t pay his bills after invoicing and dunning, you may wish to file a lawsuit. Construct sure that the anticipated recovery from the lawsuit is worth your cost and effort in pursuing it. There are real costs involved in suing your debtors, which you may or may not get back in the end. Can you find your debtor? Can your debtor satisfy the judgment? Are there other creditors before you? Is the debtor likely to file a bankruptcy? Look at all of these variables in your decision to sue.
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