When the Check Is Not in the Mail

When it comes to collecting overdue debts, the key is to not make a bad situation worse, say Atlanta lawyers who focus on creditor-debtor law.

“The best type of letter is very vanilla,” says Douglas Tozzi with Tozzi Law in Decatur. “‘Hey, this is what is owed. We’d like to give you an opportunity to pay. If you don’t, we’ll have to look at our options.’ Something to that effect. Not threatening or making it anything more than it needs to be.”

Too often, he sees creditors doing the opposite—trying to publicly shame someone who owes them money through social media attacks or disparaging them to other businesses. “You don’t want to do anything that would subject you to some potential counterclaim for defamation or tortiously interfering with a contract or business relationship” Tozzi says. “Now you’ve made the case about something else.”

Atlanta lawyer Beth Rogers, with Rogers Law Offices, helps clients collect debts ranging from thousands to millions. While noting that legal advice can be obtained only by consulting directly with an attorney, she says that of course creditors have the right to send demand letters and make phone calls, but they should be reasonable about it. 

“There used to be debt collectors that would make harassing phone calls and threaten that people who owed money were going to be put in jail, which doesn’t exist in America. We don’t have debtors’ jail,” she says. “Those were things that the [1977] Fair Debt Collection Practices Act was designed to protect against.”

Even though the FDCPA applies to third parties collecting debt, not the original business to whom the debt is owed, Rogers still urges avoiding threats, calling late at night, or calling so often that it’s overbearing. It’s also important, she adds, to avoid unwittingly agreeing to a new deal.

“The thing I see a lot with small businesses trying to collect their own debt is they will engage in communication with the debtor and let them pay a small bit here or there, and that is a bit dangerous because it can create what is called a quasi-new agreement under the law and change what the original terms of the debt were,” Rogers says. “Then, when payments stop again, the creditor may have a more difficult time enforcing the original contract terms.” She advises clients on language that can be used in communications to prevent this.

When you’re talking with a party who owes you money, Tozzi adds, your goal should be to find out why they’re not paying so you can take action to collect as soon as possible. “Is there a problem with the material or service provided, or is it they don’t have the money, or is it they have no intention of paying me and I’m going to need to take the next step?” he says. “Often people will wait too long. There are limitation periods you have to be mindful of. Once you figure out you’re not getting paid, there’s no reason to continue waiting.”

In Georgia, if the amount owed is under $15,000, that next step is filing a claim in magistrate court, which can be done without a lawyer by filling out a statement of claim form available on most court websites and attaching proof of the debt. The better the documentation, the better the chance at recovery, which is why Tozzi recommends extra steps like taking lots of photos of service-related work.

“If you have an email that says ‘I acknowledge the debt, but I can’t pay you right now,’ that’s a good piece of evidence,” he says. “When you do file a claim, sometimes people who were very happy with your work or services or materials are suddenly no longer happy. Suddenly everything is wrong and you’re the worst person ever. That’s why sending a letter and at least getting something you can use would be helpful. If they didn’t bring up issues before litigation and they had the opportunity, then that reflects poorly on the debtor.”

If the debt is larger than $15,000, a business entity cannot represent itself in court. 

Rogers says that, while many lawyers can assist in securing a judgment, one who focuses on creditor-debtor law will have more experience putting the creditor in the best position to recover payment on the judgement.  

In Georgia, which Rogers characterizes as creditor-friendly, wage and bank garnishments are available to collect on a judgment. A judgment in Georgia can be good as long as it’s properly renewed every seven years.

Even with the law on the creditor’s side, Tozzi says some debts may not be collectable for a variety of reasons, including bankruptcy and death. Choosing which ones to let go is a business decision. “You want to look at that to begin with before you’ve spent too much time trying to collect something,” Tozzi says. “I would always advise getting an attorney early.”