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.