In general, it can be easier to collect a commercial debt as a creditor if you have secured the debt with collateral and perfected your security interest. With a secured debt, creditors can claim the property to pay off the debt. For example, a mortgage is one of the most common types of secured debts. In contrast, an unsecured commercial debt is not tied to any property. Typically the only way to collect it is by filing a lawsuit and enforcing the judgment that you obtain. The commercial collections lawyers at Klapper & Fass can assist creditors with unsecured debt issues in New York and nationwide by using skillful negotiation, aggressive litigation, and tenacious enforcement of judgments.The Unsecured Collections Process
When a creditor in New York does not have a security interest, the loan or credit is considered unsecured. If the debtor defaults, the creditor's only recourse is to file an action to obtain a judgment against the debtor. In representing an unsecured creditor, we usually start by sending demand letters. Sometimes a demand letter is successful, but often it becomes necessary to file and serve a civil complaint against the debtor.
Typically, the complaint will include a cause of action for breach of contract. To obtain money damages, it is essential to prove that a valid, binding contract existed, that the creditor performed on the contract, that the defendant materially breached the contract, and that damages resulted. Complicating matters, a defendant may transfer assets or dissipate them once it becomes aware of the lawsuit. In general, an unsecured creditor cannot obtain injunctive relief or attach property to stop a defendant from dissipating assets during the pendency of a pure contract money action, unless the creditor can prove clear fraud and deliberate secretion of assets. A plaintiff does not have the right to interfere with a defendant's assets until it obtains a judgment.
Sometimes a default judgment is obtained after filing the civil complaint because the debtor fails to answer the complaint. However, the debtor may answer with viable defenses, in which case there may be a dispositive motion or, if there are factual issues, a trial. Litigation can take a significant amount of time. Some commonly raised defenses include arguments that the goods were defective, that the services were not satisfactory or were non-conforming, that jurisdiction is improper, or that payment was already made. Whether any of these defenses is successful depends on the circumstances of your particular case.
If a judgment is obtained in a civil lawsuit, the process of collections continues. Most debtors pursued past the demand letter stage do not simply pay the judgment once it is obtained. Instead, the judgment will have to be recorded in a county where the debtor holds property that is sufficiently valuable to execute on it. Money judgments can generally be enforced against any property that can be assigned or transferred, whether it involves a present or future right or interest, and whether it has vested or not, unless it is exempt. As long as the property is not exempt, you can usually execute on a lien placed on the debtor's property by having the sheriff seize it and arrange for a public sale, from which you can recover the appropriate debt. Often, bank searches are conducted for the debtor’s operating accounts and when located can be restrained and then levied upon by the Sheriff.Retain an Experienced Debt Collection Lawyer in New York
The debt collection litigation attorneys at Klapper & Fass have a high rate of success representing entities in New York and throughout the United States. Our clients have included Fortune 500 equipment lenders and finance companies, as well as large and medium-sized businesses in the textile, construction, transportation, and credit industries. Many of our collections cases are those of first impression, involving novel issues of law. From offices in White Plains and Manhattan, we assist clients from throughout the five boroughs of New York City. We also provide legal services in New Jersey and Connecticut, among other states. Contact us at 914.287.6466 or via our online form.