Supply House Construction Collection

    Attorney Dave Lackey practices supply house construction collection in the Construction Law Group at Decker Vonau.  Attorney Lackey has extensive litigation experience and a proven success in collecting debts and judgments for material suppliers in an efficient and legal manner.

Our representation and collection on delinquent accounts, includes:

• Locating and Notifying the Debtor
• Cost Effective Collection Techniques
• Initiating Litigation to Collect on Accounts
• Obtaining Judgment Liens on Real and Personal Property
• Performing Wage and Bank Garnishments
• Conducting Judgment Debtor Examinations

    As a client, you can expect that the collection process we employ is designed to mitigate legal fees incurred, while maximizing the total amount collected on behalf of our clients.

    We generally initiate the collection process with either a letter or a telephone call.  If the debtor is interested in working to pay down his or her debt, but is unable to pay it in full, then we will ask that debtor to sign a cognovit promissory note.  A cognovit promissory note is simply a promissory note with “cognovit” provisions.  Those “cognovit” provisions allow us to submit an answer on behalf of the judgment debtor upon default, and avoid the normal litigation process (discussed later).  The debtor does have the right to challenge a cognovit judgment, but the debtor must be able to allege that he or she has some defense to the judgment entered.

    Normally, we will attempt to have the debtor personally sign the cognovit promissory note, as well as some other guarantor.  If there is no other guarantor, we might ask that some security (such as a mortgage) also be provided with the note.  However, in certain cases, it is sufficient to just have a note in place without said extra security or signatures.

    If a debtor is unwilling or unable to work on repayment of his or her debt, then we will generally recommend that a lawsuit be filed.  There are court costs that will be paid by you in the beginning of the case.  If you are successful in collecting upon an ultimate judgment, you should be able to recover those court costs.  You might not be able to receive compensation for attorney fees incurred.  Attorney fees are not ordinarily recoverable in court actions.  However, there are some statutes or circumstances that allow recovery, and we will assert any cause of action available in order to retain your right to recover attorney fees.  You should also be aware that the amount you recover in a judgment does not necessarily reflect the amount that you will eventually receive from a debtor.  Often, you receive funds through a negotiation process after a judgment is obtained.

    Once a lawsuit is filed, the debtor has 28 days to serve his or her Answer.  The Answer must also be filed with the Court.  If a debtor fails to serve and file his or her Answer, then we will ask the Court to grant default judgment.  You should be aware, however, that Courts generally prefer to have matters heard on their merits.  Thus, a debtor who requests permission to file a late Answer will often be allowed to do so.  Once a default judgment is obtained, it is more difficult for a debtor to overturn it.

    If a debtor files an Answer with the Court, there are four possible paths that the case may take.

    First, the debtor may file bankruptcy.  If a debtor files bankruptcy at any point in the collection process, then all collection steps against that debtor must terminate.  Any amounts paid within the previous 90 days on outstanding balances may ultimately have to be returned to a bankruptcy trustee, as preferences.  There are limited exceptions to the preference statutes, and limited instances where debt may be determined to be non-dischargeable.  However, in most instances the filing of bankruptcy will terminate all collection efforts.

    Second, the debtor may be willing to negotiate once he or she has filed an Answer.  Factors to be taken into account at that time will be the issues or defenses involved and the time and costs of litigation.

    Third, it may become necessary to have a trial on the merits.  Trials are expensive, as they require significant preparation and court time.  Thus, we generally seek to avoid trials, where possible.

    Fourth, we may be able to obtain a judgment through motions.  Depending upon circumstances, we may be able to move for immediate summary judgment.  A Court will grant summary judgment if the material facts in the case are not in dispute, and where you would be entitled to judgment as a matter of law.  If we are not able to move immediately for summary judgment, we will often serve the debtor with discovery.  Under the discovery rules, parties must provide written responses to questions, documents requested, and may even have to appear for depositions.  Discovery is a “two-edged sword,” as the debtor may also serve you with discovery requests.  If you are served with discovery requests, then you must respond to those requests in as completely and honestly as possible.  In appropriate cases, we can often move for summary judgment after termination of the discovery process.  While we can file a motion for summary judgment (or other dispositive motion) early on in the case, we can never guarantee how long it will take a judge to rule on that motion.  Judges often rule on motions within 60-90 days, but can sometimes take significantly longer periods to make a ruling.  This is especially true if the motion is heavily-contested and there are complex legal issues involved.

    Once a judgment is awarded, we then take steps to collect that judgment.  We prefer the less costly collection methods first, as they will maximize your ultimate return.  Sometimes, we are able to negotiate an Agreed Judgment Entry, where you agree not to execute upon your judgment as long as the debtor makes timely payments.

    If an Agreed Judgment Entry is not feasible, then we will take steps to collect the judgment involuntarily.  The quickest and easiest method of collection is the bank account garnishment.  It is best to garnish a debtor’s account when that debtor is unprepared for the garnishment.  Thus, the more information that you can provide to us regarding the debtor’s bank accounts, the more likely our chances of success.  Further, we may be able to obtain satisfaction of the judgment without resort to other post-judgment collection methods.  Thus, it is a good idea to make copies of any checks received from the debtor, or to obtain that information in an initial credit application and update it as appropriate.

    In addition to bank account garnishments, we will file certificates of judgment in counties where the debtor owns real estate.  If you have knowledge of real estate owned by the debtor, please let us know as soon as possible.  The certificates of judgment operate as liens upon all real estate owned by the debtor in that county, when filed with the Clerk of Courts of any county.  If the debtor is not paying your bill, it is likely that there are other unpaid creditors.  Thus, you should not be alarmed if you are named as a defendant in a foreclosure action.  A foreclosing party must name as defendants every party with any interest in the real estate being foreclosed.

    If we know little or nothing about a debtor after the rendering of a judgment, we will serve the debtor with a motion for a judgment debtor exam.  A debtor personally served with a judgment debtor exam is required to appear at court and provide information regarding his or her assets.  If a judgment debtor is properly served with a judgment debtor exam, he or she may be subject to arrest for failure to appear at a judgment debtor exam.

    Sometimes we will have difficulty obtaining service of the original Complaint, or other court documents (such as the judgment debtor exam) on a debtor.  In those instances, we generally employ a process server.  While a process server will cost more than service by a Bailiff or the Sheriff, the process servers are normally more successful in making service.  They have access to the most recent databases regarding debtor locations, and they are willing to attempt service after normal business hours.

    It is our goal to minimize the collection costs incurred by you.  Thus, we generally employ a “step” approach to collections.  We increase collection and litigation efforts in “steps,” as required by the circumstances.  However, we always attempt to first litigate and collect by using the simplest and least-costly steps.  We will always attempt to communicate those steps with you, and to provide you with copies of all documents relevant to the case.

    You can minimize collection costs and reduce certain steps by keeping current relevant information regarding the debtor.  Specifically, it is helpful if we know beforehand all addresses, telephone numbers, corporate and personal names, social security numbers, companies or persons with whom the debtor does business, banking information (with copies of checks), and any other information regarding the debtor that you feel would be helpful in the collection of the debt.  Also remember that you should communicate to us immediately any communications made to, from or regarding the debtor.

    We hope that this explanation of our supply house construction collection practice has helped you to understand how we will attempt to collect your debt.  If you have further questions, please feel free to contact us at any time.