Debt Collection Agency USA
Amicable Debt Collection in the USA
1.1. General information
Cosmopolite Collections maintain a professional collection process, focusing on the relationships between our clients and their debtors at all times.
We pursue debtors within the bounds of federal and state laws and liaise with clients and the relationship management team to ensure that we service our clients efficiently and effectively.
Our collectors work to ensure that, if the initial collection phase is not productive, the file is adequately documented to fully utilise the second tier of our collection process, the legal phase.
When there is a dispute, we aim to reach an amicable solution between the creditor and the debtor. We do this by analysing all contractual documents (e.g. signed contracts, orders, confirmations, invoices and delivery notes, as well as standard terms previously agreed upon).
All investigations are completed with the assistance and agreement of our legal team.
1.2. Local agents
We have a network of local attorneys to assist with collections if necessary. Currently we do not offer debtor site visits in the USA.
1.3. Debt Colelction Interests in the USA
Cosmopolite Collections may charge interest back to debtors. Currently, we add 8% interest to each case placed with our office. However, in most states, if no signed contractual agreement exists, then we cannot exert legal means to collect the interest.
If the contractual interest is greater than 8%, then the interest we charge will match that of the agreed amount.
U.S.-based debtors are not used to paying interest. Often the actual amount of the interest is considered a negotiation tool between debtors and collectors.
1.4. Debt Collection Costs USA
Collection costs can not be added to a case unless a signed contractual agreement exists between the debtor and the client. However, even if the contractual agreement includes collection costs, they are often used as a negotiation tool between debtors and collectors.
1.5. Prescription in the USA
The statute of limitations governs the time period within which a lawsuit must be commenced. Statutes of limitation vary from state to state, but are generally between two and ten years for an open account or sale of goods, and between three and 15 years for a written contract.
The limitation period is suspended or recommenced if the debtor acknowledges the balance by partial payment, or Legal action is undertaken prior to the expiration of the statute.
1.6. Accepted and most common payment methods
The most common payment methods are bank transfers, wire transfers and cheque payments.
1.7. Sources of information in the USA
Cosmopolite Collections have the ability to assess the status of debtors’ businesses, including real estate and other assets, through business reports and in-house skip tracing. In combination with our own phone contacts, we can obtain an accurate impression of a debtor’s financial situation, and we are able to recommend the next steps. In most of the fifty states, companies register with the Secretary of State, which can be accessed online. We have direct access to these websites and can obtain additional information on shareholders, status and some corporate developments, which may be published. A debtor with an unknown address can be traced by our in-house skip tracing efforts.
We are able to access many different websites to assist in locating the debtor, including business financial reports and insolvency websites. We also have the ability to employ external skiptracing agencies for additional information for additional fees.
2.0. Safeguarding measures
Our client can safeguard debts from U.S.-based debtors by having a signed personal guarantee in place upon the sale of goods or services.
A signed personal guarantee gives the creditor the right to pursue personal assets if the debtor company defaults.
3.0 Legal Debt Collections USA
3.1. General information
The judicial system in the U.S. is unique, as it is made up of two different court systems: the federal court system and the state court systems.
While each court system is responsible for hearing certain types of cases, neither is completely independent of the other and the systems often interact.
Solving legal disputes and maintaining legal rights are key goals of both systems.
3.2. Legal system
The U.S. legal system is comprised of 51 separate legal sytems: the federal court system and the court systems of the 50 states. The vast majority of commercial collection matters are handled through state and county courts.
3.3. Required documents
In order to apply the legal dunning procedure, Cosmopolite Collections need a clear statement of account indicating payments and credit notes that have been booked regarding the outstanding invoices.
In the case of a lawsuit procedure, the attorney assigned will require copies of the complete contract, orders, order confirmations, delivery notes, invoices, etc. Every step of the trading relationship should be provable by documentation. In case of dispute, proof of the conversations or emails between the debtor and the client should also be kept and provided to the assigned attorney.
3.4. Legal dunning procedure USA
This is most commonly known as the initial legal proceeding. The attorney assigned to the case is required to take efforts to collect or settle the outstanding debt prior to commencingany legal action. If the debtor fails to respond or pay the outstanding debt in the initial phase, then the attorney will provide recommendations and suggestions for further action and costs of the same.
Once an attorney is involved, they will charge a commission fee on any collected amount.
3.5. Lawsuit USA
Once the attorney receives the suit requirements and any necessary documentation, the attorney will prepare thesummons and complaint and file both with the clerk ofthe court. It is advisable that lawsuits are filed nearest to the debtor’s location.
All courts require personal service of process upon the debtor, and most courts require that the defendant be served with the summons and complaint within 90 to 180 days after the lawsuit is filed. The courts will frequently dismiss the lawsuit if the debtor is not served within the state’s statutory period of time for service of process.
Appeals are limited to cases in which there is a legal dispute as to how the law is applied to the facts of the case. Factual issues can not be appealed.
3.7. Debt Collection Costs USA
Legal collections in the U.S. are handled by local attorneyson a contingency fee basis. Our attorney will submit us recommendations and suit requirements. The suit requirements consist of court costs and a non-contingentsuit fee, where the non-contingent suit fee can be up to 5% of the balance placed for collection.
That amount is credited toward an overall contingent suit fee of 10%, plus the previously mentioned commission fee charged on any collected amount. The only exception to the contingency fee arrangement is if the account is heavily disputed or if the debtor files a counterclaim against our client.
The attorney must then defend the client against the counter claim, and in those cases, the attorney will require compensation at an hourly rate.
3.8. Expected time frame
The average duration of a legal dunning process is between seven and 30 days, whereas a court procedure can take up to two years or longer depending on the complexity of the case and the backlogs of the courts in that jurisdiction.
3.9. Interest and costs in the legal phase
Unless the creditor has a signed a contractual agreement allowing interest, it is only allowed by the courts once judgment has been filed. All other fees and collection costsare at the discretion of the presiding judge and in most casesare never allowed.
4.1. Enforcement in debt
After the court enters the judgment order, our attorney records the judgment in the public record. The recording makes the judgment a lien against the debtor’s current or after-acquired property. Judgment liens will remain valid and enforceable from five to 25 years after the date of entry, depending on the jurisdiction.
Post-judgment interest accrues from the date the judgment was entered at the state’s statutory rate,if the court includes post-judgment interest in the judgmento rder. Our attorney will engage in post-judgment discovery if attachable assets of the judgment debtor cannot be located.
Post-judgment discovery can include interrogatories, requests to produce financial documents and depositions ofthe debtor’s principals, in order to learn the nature, extentand locations of the debtor’s assets.
If the debtor does not respond to post-judgment discovery requests, the court can issue a body attachment for the judgment debtor’s principal. If that becomes necessary, the principal will be held in jail until the debtor gives a sworn testimony in court about the assets.
4.2. Enforcement in movable property
The judgment must be served upon the defendant through service of process, after which the court will enter a writ of execution. The writ of execution allows the judgment creditor, through the court and the local sheriff or bailiff, to garnish bank accounts, seize and sell property, and in some states, place a keeper in the debtor’s business to seize all monies received on the days that the keeper is present.
All out-of-pocket costs to execute on the judgment are chargeable to the judgment debtor. Costs may include garnishment fees,sheriff or bailiff fees, keeper fees and any fees involved inseizing and selling the judgment debtor’s property.
4.3. Enforcement in immovable property
If the debtor owns real estate, it is possible to receivea recording of claim in the land register and to then, if attachable, force the attachment, the attachment and sale or, in case there are tenants, the sequestration of the real estateby court order.
All of these processes are more expensive than the others and require patience. Recording of claims could take several weeks to one month, and afterwards, having the land or real estate up for sequestration or saleup to finally being sold could take several months to several years.
4.4. Expected time frame
Enforcement of movable property has a wide time frame. It could take four to six weeks to receive funds on the placement of a keeper and up to six months or longer to seize and eventually sell any assets.
This time frame will vary within the 50 states. The time frame for enforcement of real estate is the most difficult to estimate. In most cases, thereare other creditors, such as financial institutions, ahead of us.
The most difficult phase of this process is finding a buyer willing to pay the market value for the real estate. In many cases, property could go unsold for months, if not years.
5.0 Insolvency Proceedings in the USA
5.1. General information
Bankruptcies are controlled by federal law, which prevents any collection effort or litigation from proceeding so long as the bankruptcy petition is pending. More bankruptcies are being filed as no-asset bankruptcies, in which the debtor gives a sworn statement that there are no assets to satisfy creditors.
The creditors are not allowed to file proofs of claimin a no-asset bankruptcy, unless the bankruptcy trustee locates the assets. In that case, the bankruptcy court will notify creditors to submit proofs of claim. In bankruptcy filings where there are assets and the creditors file proofs of claim, it can take from 12 to 24 months to learn if the creditors will receive distributions from the bankruptcy estate.
There are two different types of bankruptcy proceedings:
- Chapter 7 - Liquidation A
Chapter 7 filing is the most common form of bankruptcy. Liquidation involves the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the proceeds to the creditors. Because each stateallows debtors to keep essential property, most Chapter 7 cases are no-asset cases, meaning there are insufficient non-exempt assets to fund a distribution to creditors.
When there are assets available for liquidation, a proof of claim maybe filed. The proof of claim must normally be filed within 90 days since the original file date of the bankruptcy.
- Chapter 11, 12 and 13 - Reorganisation Bankruptcy
under Chapters 11, 12, or 13 is a more complex reorganisation, allowing the debtor to keep some or all of the debtor’s property and to use future earnings to pay offthe creditors. Proofs of claim are required to be filed for consideration of any pay-out or dividends.
Chapter 7 or Chapter 13 is usually filed by consumers or personal guarantors, and Chapter 11 is normally filed by companies or corporations. Individuals filing Chapter 11 areallowed, but rare.
Chapter 12 is similar to Chapter 13 but available only to farmers and fishermen in certain situations, and Chapter 12 generally has more generous terms for debtors.
5.3. Required documents
In order to file a claim on behalf of our client, AtradiusCollections need:Copies of invoicesCopies of contractsCopies of statement of account andThe original claim form signed by the original creditor
5.4. Expected time frame and outcome
The deadline to file claims is normally within 90 days sincethe original filing date of the proceedings. It may take12–24 months to find out if any dividends are available fordistribution. The duration of a bankruptcy proceeding isbetween six months and five years.
In the preferential payment period or 90 days prior to thefile date of the bankruptcy, the trustee can dispute payments made by the debtor to the original creditor. If the trustee disputes these payments, the creditor has to refund them and can only file a claim for the corresponding debt instead.
6.0. Arbitration and Mediation in the USA
It would be rare, unless included in a signed contractua lagreement, to use arbitration or mediation prior to filing a lawsuit against the debtor.
The U.S. courts are increasinglybacklogged. More courts are requiring that parties to alawsuit submit to non-binding mediation or arbitrationbefore the case will be allowed to proceed to trial. Mediationor arbitration is an informal process, by which an arbitratoror mediator meets with the parties’ attorneys and one ortwo witnesses for each side.
The parties each present their documentary evidence and one or two witnesses. The mediator/arbitrator will discuss the strengthsand weaknesses of each party’s case and will make arecommendation about a probable outcome at trial.
If both parties agree with the recommendation, a settlement agreement is submitted to the court. The recommendation of the mediator or arbitrator is non-binding, and either party can choose not to accept the recommendation.
Nevertheless, there is one important consideration for theparty that chooses not to accept the recommendation. If that party receives a lesser result at trial than what the mediator/arbitrator recommended, that party must pay the opposing party’s attorneys’ fees.