Legal collection means filing suit against the debtor business, usually in the county where it is located, so a judgment can be enforced against its bank accounts and assets. We prepare the file, show you the costs and the collectability evidence, and forward it to a vetted local attorney only with your written approval.
When suit makes sense
- The debt is documented: signed terms, purchase orders, proof of delivery
- The debtor is still operating or has assets we have located
- The balance justifies court costs
- The statute of limitations is approaching
What it costs
Before suit, a partner attorney sends a demand on law-firm letterhead at no extra cost to you on unresolved accounts of $2,500 or more. Many debtors pay at this stage.
If you approve suit, two separate fees apply to what is collected from then on: our 10% legal management fee, which covers attorney selection and supervision, reporting and remittance, and the attorney's own contingency, typically 20 to 33%, under a separate agreement you sign with the firm. Court filing and service costs are advanced by you and shown in our recommendation before you decide.
On strong claims of $15,000 or more, with a documented debt, an operating debtor, located assets and no real dispute, we can advance court costs ourselves. They are reimbursed only from recovery, our management fee on that file is 15%, and if nothing is recovered you owe nothing.
After judgment
A judgment is only as good as its enforcement. We continue with bank levies, garnishments, debtor examinations and liens where state law allows.
How a collection lawsuit proceeds
The attorney usually starts with a demand letter on firm letterhead, which on its own resolves some accounts. If it does not, the attorney files a complaint in the appropriate court and has it formally served on the debtor's registered agent or an officer. The debtor then has a set time to respond, commonly 20 to 30 days depending on the state and court.
Many business defendants never answer, and the attorney can then ask for a default judgment. If the debtor does answer, the case moves through the exchange of documents and often to a settlement or a motion for summary judgment when the debt is well documented. Contested cases take longer, from several months to a year or more, which is why we recommend suit only when the evidence and the debtor's assets support it.
Questions we answer before recommending suit
- Is the debtor a properly identified legal entity, and is it still in good standing?
- Is there a personal guarantee that adds a second defendant?
- Does the contract have a venue, arbitration or attorney fee clause?
- Is the debt within the statute of limitations? For sales of goods the UCC generally allows four years, and contract claims commonly range from three to six years by state, with some states allowing longer
- Does the debtor have a bank account, receivables, real estate or equipment that a judgment could reach?
- Has the debtor filed bankruptcy, or is one likely?
Who pays the legal fees
In the United States each side usually pays its own attorney fees unless a contract or statute says otherwise. If your credit application or terms include a clause allowing recovery of attorney fees and collection costs, a court may add them to the judgment, which makes smaller claims worth pursuing. Court costs such as filing and service fees are often recoverable as part of the judgment as well.
Business entities generally must be represented by a licensed attorney in court, apart from small claims court in many states. Small claims limits vary widely by state and are often too low for commercial balances, which is one reason we work through a network of collections attorneys.
Frequently asked questions
Do I have to approve a lawsuit?
Yes. Nothing is filed without your written authorization, and you see the full cost estimate first.
Who chooses the attorney?
We recommend a vetted attorney in the debtor's county from our network, and you approve the choice. Our fee and the attorney's fee are disclosed separately.
How long does a collection lawsuit take?
A default judgment can come within a few months of filing when the debtor does not respond. Contested cases often take six months to a year or more, depending on the court. We give you a realistic estimate for the specific county before you approve suit.
What if the debtor has no assets?
Then a lawsuit may only produce an uncollectible judgment, and we will tell you so. Asset research is part of every legal recommendation, and we would rather advise you to close or hold an account than spend your money on court costs.
Will I have to appear in court?
Usually not. Most commercial collection suits end in a default judgment or a settlement. If a case is contested, you may need to sign an affidavit or, less often, testify about the account. The attorney will tell you well in advance.
Related services
- Commercial collections
- Pre-collection letters
- Judgment enforcement
- International collections
- Skip tracing
- Bankruptcy claims
- Lien & bond claims
Industries we serve
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