A “confession of judgment” is an agreement where a party agrees to have a judgment entered against them on the basis of a pre-existing contract. A “confession of judgment” provides a mechanism where a judgment can be entered against a debtor so long as certain prerequisites and notification provisions are followed. A “confession of judgment” eliminates the need to engage in a full-blown trial to adjudicate liability. In order to collect amounts owed pursuant to a “confession of judgment”, a creditor must follow certain prescribed rules of procedure. Executing on a “confession to judgment” requires strict adherence court rules before financial recovery can be realized. For this reason, it is advisable to consult a knowledgeable attorney familiar with “Confessions of Judgment” in order to recover monies due and owing from a debtor. For more of information, contact the Law Office of Joseph M. Adams at 215-996-9977.
The Commercial Debt Collection Lawsuit
Prior to instituting suit, a commercial debt collections lawyer will typically review and analyze all contracts and agreements relevant to the transaction at issue. Defendants are identified and named as appropriate. If there are personal guarantors, they can also be named as defendants. In some cases, principals of a debtor corporation may be held personally liable under a theory of “piercing the corporate veil”. Under that theory, the limited liability normally afforded to the shareholders of a corporation can be bypassed where proper corporate formalities are not observed and where the corporation is deemed an “alter ego” of the shareholders.
After the above analysis is performed, a civil complaint is then prepared and filed with the appropriate court. The complaint is then served upon all defendants with a notice to respond. If the defendants do not respond within the allotted time, a default judgment can be entered against them.
In the event the defendants file a response to the complaint, the matter becomes contested and will proceed through the litigation process. Should this happen, both sides have the opportunity to take discovery. Discovery is the process where the plaintiff and defendant have the ability to request relevant information and documents from each other related to the subject matter of the litigation. Once the discovery phase of the litigation is completed, the plaintiff can request the entry of summary judgment if certain conditions are met. The summary judgment procedure is a way to more quickly obtain a judgment against a defendant if there are no genuine issues of material fact left to decide and it appears that a judgment is warranted as a matter of law. Otherwise, the matter will proceed to trial for adjudication and judgment. Assuming the court enters judgment in favor of the creditor plaintiff, either by way of the summary judgment procedure or trial, the court can the enter a writ of execution to levy upon the debtor’s assets.
Settling the Commercial Debt Collection Case
It is not uncommon for defendant debtor, once sued, to recognize that the cost of defending a lawsuit, and facing the prospects of judgment and execution are simply not worth it. In such cases, a defendant may wish to settle their debt at that time. If a favorable settlement is reached, the attorney will typically draft a settlement agreement outlining the terms and obligations of the parties.
Post Judgment Enforcement and Remedies
Should the commercial debt collection case not settle and instead proceed to favorable judgment, either by way of default or trial, the plaintiff creditor can then proceed with post-judgment enforcement remedies. If defendant debtor’s assets are not readily known or identifiable, discovery in aid of execution can then take place. This can include such things as depositions, interrogatories and other discovery tools used for the purpose of identifying and locating a defendant’s assets. A writ of execution can be issued by the court. Bank accounts can be garnished and personal property can be levied upon and sold to satisfy the judgment.
Regardless of the state in which your company is located, if a delinquent customer or debtor either conducts business or is located in either Pennsylvania or New Jersey, the Law Office of Joseph M. Adams can assist you in collecting a commercial debt or outstanding invoice. In most cases, companies which conduct business within a particular state or have a physical presence therein provide a state court with jurisdiction to hear and adjudicate claims regarding that company. This can be true even though you may have entered into an agreement or conducted a transaction outside of Pennsylvania or New Jersey.
Domesticating Foreign Judgments in PA or NJ
Judgments entered and obtained in one state can be given full force and effect in another state under the “Full Faith and Credit” clause set forth in Article IV, Section 1 of the United States Constitution. Each state has its own specific procedural rules for filing foreign judgments within its borders. The process of having a foreign judgment registered in another state is also known as “domestication”, that is to say the foreign judgment is being “domesticated” in a state other than where the original judgment was entered and obtained.
Many times, a debtor will be sued in one state but may not have any assets in that state to be levied upon. In such cases, it may be advisable to have the judgment filed as of record in another state where the debtor either has a physical presence or has assets which can be levied upon or garnished.
If you have secured or obtained a judgment in a particular state and would like to have the judgment filed, recorded, recognized and domesticated in Pennsylvania or New Jersey, contact the Law Office of Joseph M. Adams at 215-996-9977.
One of the most drastic measures that can be taken by a creditor against the debtor when attempting to collect a debt is the use the involuntary bankruptcy petition. Section 303 of the United States Bankruptcy Code authorizes creditors, in certain situations, to request a Bankruptcy Court to declare a company bankrupt for not paying its bills. If the involuntary bankruptcy petition is granted, it is possible that the company could be liquidated to pay off creditors. The Bankruptcy Code sets forth very specific requirements that must be met in order to have a company involuntarily declared bankrupt. Because of the many possible legal complications that can come into play when filing an involuntary bankruptcy petition, creditors must exercise extreme caution and due diligence in deciding whether to proceed with such action.
A decision on whether to proceed with the filing of an involuntary bankruptcy petition should be made only after consultation with a skilled and knowledgeable attorney. The involuntary bankruptcy process is a very technical proceeding from a legal standpoint. The involuntary bankruptcy petition procedure can be a very good strategy for a lawyer to use in certain cases on behalf of creditors, and can lead to monetary recoveries which would otherwise be extremely difficult to obtain.
Mr. Adams has been successful in procuring recovery through the use involuntary bankruptcy proceedings. In one case, Mr. Adams organized and led a team of creditors with aggregate claims of $1.4 million against a debtor corporation. The judge in the case specifically recognized Mr. Adams’ role as lead counsel and noted that no assets would have been available for distribution to creditors except for his efforts. (See In re: Voicesmart Corp., 2000 WL 33950132 (Bankr. D.N.J.)).