Representing Businesses and Individuals in Chicago and Northern Illinois

Get Paid! Collecting on Commercial Debt: The Philosophy of the Fight

By Adam Whiteman, Commercial Collection Attorney

Walking into a courtroom with a brief case full of arguments is much the same as walking into a saloon in the Old West and demanding justice. It’s a fight. There are no two ways about it. Once a debtor has decided you need to sue them to collect, they have basically told you to “come and get it.” It is essential, therefore, that you have an advocate who is prepared for a fight, can endure challenges presented, and ultimately prevail. This takes determination, grit, and creativity. Above all, though, it takes a willingness and ability to fight.

Just like a fight, different debtors have different tactics. Let’s look at a few.

The No Show. Like a bar fight in the Old West, sometimes when you call someone out, they hide in the back room. This guy will simply never be anywhere. He will avoid service of summons. He will not show up and allow a default to be entered only to ask the court for time to get an attorney. When he finally gets an attorney, the attorney usually comes to realize the client won’t pay the bills and the attorney withdraws. The No Show then cycles through a number of attorneys, constantly seeking to delay engagement or progress of the collection case. Persistence is the key here. (My firm recently served a defendant while he was on his riding lawn mower doing yard work.)

The Runner. The Runner moves around. His tactic is to evade and confuse. This type of debtor will duck and dodge any question. He will never be straight with you, with the hope of tricking you or even the court about the facts of the case. He will set up his company in someone else‘s name. Many professional debtors put their companies in their wife’s name even though she has nothing to do with the business. One fellow I came across put his company in his mother‘s name. He only agreed to settle up and pay when we sent his elderly mom a notice to take her deposition.

The Big Talker. This guy tries to act like your friend. Of course, he wants to get this case settled. He just needs answers to questions about 120 invoices going back three years. He may even sign a settlement agreement with no intention of complying with it. Don’t be tricked into delays with this debtor. Also, take advantage of the Big Talker‘s cooperation while you have it. The Big Talker will make promises to pay, and he will tell you there is nothing to worry about. In such a case, you should ask the debtor to secure his promise with a lien on his home or boat or motorcycle. After all, if you are not supposed to worry about getting paid, then he should not have to worry about you foreclosing on the security.

The Trickster. This guy is constantly evading the truth. Everything he does is tinged with a coating of fraudulent or misleading conduct. He will make false claims of payment. He will set up a new company with a deceptively similar name and not update his credit agreement. He will issue NSF checks. He will promise payment if you just allow him to make this one big delivery for which he is expecting a big pay day. He will use all of his company’s money for fancy cars and trips, and then declare bankruptcy. The best way to deal with the Trickster is to nail down the facts as early as possible. Examine public records regarding his entities and other lawsuits. Draft the complaint and discovery in such a way that you get valuable admissions at the earliest stage of litigation. Treat his deposition like brain surgery and be prepared to deal with his deception by confronting him with facts, facts, and more facts.

The Penniless Debtor. This guy will have some debt relief company call you to work out a deal for pennies on the dollar. Or he will simply tell you he has no assets and you won’t be able to collect anything, so what‘s the point? The trick here is to be the last one standing. Many other creditors will give up. You should demand tax returns and bank records. See where his money is, and where it has been going. Bank records often tell the tale. Follow the money.

The Big Guns. This guy has a friend at a major law firm who comes into the case with all kinds of motions, counterclaims, and accusations. The attorney friend calls foul and flops around in the courtroom, acting like his debtor client is the real victim, even though he has racked up $450,000 worth of debt with your company. Like many such fighters, the Big Gun‘s energy is directly related to the balance left on his $5,000 retainer. The key here is to weather the storm of blows. Deal with them one by one, with dispassionate grace. You will impress the judge. The Big Guns will realize they can’t get you to back down with their bluster and paperwork. A smaller law firm with reasonable fees, can be a real benefit in such a battle when the Big Guns are meanwhile demanding $500+/hour from their client. If your debt is legitimate, the opposing counsel will see that. Your goal here is to prove to opposing counsel that you have a good case, with good facts, and you are not going away.

It is critical when collecting on a commercial debt that you recognize patterns in the debtor’s behavior, so that you prevent problems before they occur—cutting off the ring, so to speak. Know your opponent and fight back with calm deliberation, and with fists full of facts.

Adam Whiteman is an attorney who handles commercial colIections, with an office located at 118 North Clinton Street, Suite LL 380, in Chicago, Illinois, and can be reached at [email protected], or at 312-655-1000. He is a Member of the Commercial Banking, Collections, and Bankruptcy Section Council.