Debtors sometimes don’t want to have to pay their debts, but this doesn’t mean that the creditors have to deal with the refusal without taking action. It’s sometimes possible for creditors to take legal action against the debtor, but this requires them to have a good case.
Before they head to court, creditors should ensure they have everything in place. Legal action often hinges on the ability to prove your side of the case. Here are some things for creditors to consider before they take legal action.
Collect proper documentation
Creditors must be able to demonstrate that a debt exists, that it’s overdue and that they’ve taken reasonable steps to collect it. Key documents include:
- A signed contract or agreement that outlines payment terms
- Invoices and statements showing the amount due and payment deadlines
- Correspondence (emails, letters or notes) that show payment reminders or attempts to resolve the issue
- Proof of delivery or services rendered, such as work orders, delivery receipts or signed acknowledgment forms
In short, the cleaner the paper trail, the stronger the case.
Ensure legal standing and compliance
Before filing a claim, creditors need to confirm that they have legal standing. This means being the proper entity to bring the claim and making sure the debt hasn’t been sold or assigned elsewhere without proper documentation.
Next, verify that the claim is still enforceable, which means collecting within the statute of limitations. If too much time has passed, even a legitimate debt may no longer be collectible in court.
It’s critical to have everything in order before heading to court. Working with someone familiar with these matters may help to increase the likelihood of being able to collect the debt.