By Attorney John Tasch

In any business, unpaid and overdue invoices disrupt cash flow, hinder growth, and strain relationships with customers. Chasing overdue payments is a cumbersome task that distracts businessowners from their proper business. Every case requires a unique strategic approach to recover what is rightfully owed, but it's important to know that there are effective and efficient legal maneuvers for making good on overdue invoices. In this article, I'm going to take you through the process of turning an overdue account receivable into a judgment, which can be essential in getting your business's money back.

Preparing All Documentation:

It is essential to gather and organize all relevant documentation pertaining to the overdue invoices before taking any formal action. Having a comprehensive record of the transaction beforehand will strengthen your case and streamline the recovery process. This includes contracts, agreements, invoices, proof of delivery, and any correspondence with the client regarding payment terms. Your goal is to gather and organize this documentation so that your right to money from the customer is obvious to anyone who looks at it.

Preparing and Sending a Demand Letter to the Non-Paying Customer:

The first move—your ‘shot across the bow'—will be a formal demand letter. This letter clearly outlines the amount owed, the payment deadline, and, of course, contains consequences such as the threat of legal action. It is crucial to maintain a professional tone while firmly asserting your rights as a creditor. Depending on the nature of the overdue invoices and specific customer, you may want to maintain good relations. In other words, the demand letter is your final opportunity to settle the debt on friendly terms. (Note: This author has noticed that, in particular, demand letters bearing attorneys' letterheads and properly reciting the law and facts can create quite a sense of urgency within the customer business and may end the matter right then and there.)

Filing a Lawsuit if the Non-Paying Customer Ignores the Demand:

If the customer fails to respond to the demand letter or refuses to cooperate, the next step is to file a lawsuit. This involves drafting a complaint detailing the nature of the dispute, the amount owed, and the legal basis for the claim (hence why it is good to get these items correct when you first organize your documents). Furthermore, corporations generally cannot practice law; hence, you will need an attorney at this point. Qualified attorneys at CTM Legal Group will make sure you are complying with all relevant rules and regulations and get you the relief you need.

Turning the Overdue Amount into a Judgment:

The case then proceeds to court, where both parties will have the opportunity to present their arguments and evidence. If the court rules in favor of the creditor, a judgment will be entered against the non-paying customer, legally confirming their obligation to pay the overdue amount. This judgment serves as a powerful tool for enforcing payment and may include provisions for interest, attorney's fees, and court costs. Once you have the amount reduced to a judgment, a whole new gamut of legal collection tools are at your disposal.

Seizing the Non-Paying Customer's Assets:

In cases where the debtor still refuses to satisfy the judgment voluntarily, the creditor may explore options for enforcing the judgment through asset seizure. This may involve garnishing wages, placing liens on property, or seizing bank accounts or other assets belonging to the debtor (see my article about this here: https://www.ctmlegalgroup.com/i-won-my-case-now-where-s-my-cash-collecting-a-money-judgment-in-illinois). Again, it's crucial to follow legal procedures and obtain court approval for any enforcement actions taken. Attorneys at CTM Legal Group are experienced practitioners in this field which can be complex and harsh to the unwary.

Conclusion:

The journey from account receivable to judgment debtor to money in the bank requires patience, persistence, and a thorough understanding of legal procedures. However, by diligently preparing documentation, sending a demand letter, filing a lawsuit if necessary, obtaining a judgment, and enforcing payment through legal means, businesses can recover their overdue invoices from the most stubborn customers. While the process may seem daunting, attorneys at CTM Legal Group are prepared to lead you to a successful resolution and the restoration of your business's financial security. Call us today at 312-818-6700.