F.A.Q.'s

What tools are available for a company to manage its bad debt?

The most effective tool is the Credit Application. The collection is in the credit. Use credit applications for new customers, asking for credit references where credit has been extended in an amount equal to the amount the customer is seeking. In other words, if the prospective customers wants credit of $30,000, do not accept a credit reference of nominal amounts. Call the references.

Know what type of entity your business is dealing with. Is it a corporation, LLC, sole proprietor? If in doubt, ask and check the state corporations website. The website in Georgia is http://www.sos.state.ga.us/plb/.

If the prospective customer is not creditworthy, a personal guaranty of the principal or precedent may be an option.

Credit applications should set forth the terms and conditions of the relationship.

If you wish to discuss your existing credit application or want us to draft a custom credit application for your business, we can do this.

Can attorneys’ fees be obtained from debtor in order to compensate the company for the expense of retaining an attorney to collect?

There are several Georgia code sections that address the award of attorneys’ fees. The most straightforward is a provision for contractual attorneys’ fees if placed in the credit application or contract. Make sure that the provision states attorneys’ fees of 15% (of the principal and interest) as this is the contractual rate that Georgia Law allows.

However, there are certain requirements for notice and demand for attorneys’ fees that are prerequisites to enforcing the attorneys’ fees provision. We will be glad to go over these with you.

Can interest be charged on the delinquent amounts owed my company?

Yes, under Georgia Law, there is a provision of 1½% per month interest which runs on commercial accounts. Be sure you add this provision to your terms and conditions.

What if a long term customer has cash flow problems, but the company does not want to begin collections procedures?

You can always negotiate terms with a good customer who has cash flow problems. Suggest a simple promissory note whereby the debt is paid off on a monthly or periodic basis with interest.

What are the chances of actually collecting on a judgment?

This depends upon what type of entity are we dealing with and how old is the judgment. Is it a corporation and if so, is it up and running or defunct. If the latter applies, the chance of collecting is poor. If a successor corporation took over the assets and liability, there are many factors involved as to the success of collection. If it is a sole proprietorship, the individual is liable and may have assets such as a house, car, a W-2 salary, in which case collection may be successful.

Can my company’s judgment obtained against a debtor in my state be domesticated and become enforceable in Georgia?

There are two ways to domesticate a judgment. (Domestication means taking your judgment from one state and causing a like judgment to be enforceable in another state.) The first is by filing another suit on the judgment obtained in the foreign state and the second is a summary procedure known as the Uniform Enforcement of Foreign Judgment Act. If your state has adopted this Act, the domestication is somewhat simplified. An exemplified copy of your judgment is filed in the county of the judgment/debtor’s residence or corporate office, with a certified copy of the notice to the judgment debtor. Generally, in a fairly short time, a judgment from that county will be issued.

If my company files a mechanics or materialmen’s lien, does it also have to file a lawsuit?

Yes, in order to perfect your lien, you must file a lawsuit against the contractor shown in the claim of lien within 12 months of when the claim became due.

What tools are available to collect or recover on a judgment?

In Georgia, garnishment of bank accounts and employers is available. A creditor’s lien generally may be placed on residences and vehicles, as well as levys on personal property which is free and clear with the debtor. These are only examples, and recoveries may not be limited to these available remedies.