The key to this technique’s effectiveness is that after you read off then fax to your debtor all of the asset documentation they are going to have to bring into court under oath, they are more than likely going to pay you off instead. Further, you should mention if they don’t show up for the Exam, a warrant will be issued for their arrest similar to an outstanding traffic violation. This can cause them to be taken off to jail the next time they’re pulled over for a traffic violation.

Methods of Use

This technique can be done either verbally or using the letter and attached list of required items – or both. There is a separate collection letter and attached list of assets for corporate and individual debtors. Make sure to use the appropriate set. You will find the most impact is achieved when you speak to the debtor over the phone first then follow-up with a fax. You’ll be surprised how many Judgment Debtors will decide to settle up.

NOTE: If you don’t plan on actually following through with the Debtor’s Exam Order in the event the debtor doesn’t respond to this technique, do not fax or mail the letter and attachment following your collection call.

Using Your County Sheriff to Encourage Payment from your Judgment Debtor

Most judgments go uncollected after being awarded by the court. You’ve tried garnishing banks, assets and wages to no avail. What else can you do?

THE DEBTOR’S EXAM ORDER

Is there a business or individual that embraces the idea of appearing in court to reveal their company or personal assets in the greatest detail? Probably not, and your debtor won’t either. But what’s really amazing, is that getting your county sheriff to help you recover the debt is as easy as follows:

1. Inform your judgment debtor that if they don’t pay, you will have them served with a Debtor’s Exam Order to appear in court to show copies and statements of all property, stocks, bonds, notes, bank accounts, real estate, IRAs, pensions, financial statements, tax returns, insurance policies, and vehicle titles.

2. Mail or fax either the corporate or individual collection letter along with the asset detail list.

3. Follow-up with a phone call.

SEND ‘EM TO JAIL

Don’t forget to mention if they fail to appear for the Exam Order, there will be a warrant issued for their arrest. After the warrant is issued, should they be pulled over for a routine traffic violation, they will not pass go, not collect $200, and go straight to jail.

Once your debtor realizes that the courts will be examining their most confidential business or personal assets, you will be surprised how quickly a check can arrive in the mail.

It is important to remember that this is an aggressive approach to collections and should be reserved for only the most stubborn refusals to pay – an effective collection tool to be utilized with discretion and care.

Avoidance

Nearly 90% of bad checks are drawn on accounts less than one year old. Be suspicious of checks that have a number less than 125 or no number printed on it at all. Check the date and don’t deposit a check that is postdated — it may be defensible under Bad Check Statutes. Also, don’t ask for a post-dated check in response to a customer who “won’t have the check for two weeks.” In many states the criminal provisions regarding bad checks do not apply to post-dated checks. The reason is post-dated checks are a promise to pay in the future, they are not technically viewed as checks within the scope of most states’ bad check laws.

When You Receive a Bad Check

The first thing, of course, is to call the customer and let him know his check bounced and ask him if you should ask your bank to re-deposit the check. If you can’t reach the customer or if the check bounces again, your choices are to try collecting the monies yourself, asking your collection agency to help, or turning it over to your city or county’s bad check program for prosecution.

Keep the following in mind if you decide to collect the money yourself prior to calling in your outside collector or submitting to your city or county for prosecution:

• When mailing a bad check collection letter, make sure to put “Address Service Requested” underneath your return address. This is a valuable skip-tracing tool.

• If the customer offers to make good, accept only cash, money orders or cashier’s checks.

• Do not return the bad check to the check writer until you have received payment in full.

Summary of State Bad Check Laws

There are several variables, which differ by state, and you will need the particulars for your state in order to complete the sample bad check letter that follows. Contact Stevens & Ricci for a supplement to this CMS Series for your state. We’ll e-mail, fax, or mail the following for your state:

• Service fees allowed by statute

• Number of days you must wait after giving written notice to proceed as per statute

• Civil penalties provided by statute

• Amount of bad check that constitutes a felony

• Amount of bad check that constitutes a misdemeanor

Download the full tutorial at the Stevens & Ricci Resource Center. This will include a sample template letter in MS Word along with a summary of each state’s bad check laws.

Keep in mind though that you don’t want to go to court, you want to collect the monies owed. The Final Demand Letter sells the need to pay while it fulfills legal requirements. A good letter results in payment in as many as one-third of all cases, probably because the written word is far more powerful than speech at this stage of the game.

Think about the times you found yourself embroiled in a heated collection situation. After exchanging angry words – maybe even a lawsuit threat – what happened? Chances are nothing. For whatever reason, you didn’t pursue the claim.

Things change when you write a demand letter. Lay out the reasons why the other party owes you money. State that, if you fail to get payment, you will go to small claims court or turn the account over to a collection agency. Now, instead of being “just another bill collector voice on the other side of the phone,” you and your claim take on a sobering realness.

The other party must now confront the fact that you won’t simply go away, but plan to have your day in court or unleash agency collectors. They will have to expend time, energy, and money. As long as your position has merit, the chances that the other party will pay all, or at least a portion of what you demand, just went way up.

When you write your Final Demand Letter, keep the following points in mind whether or not you actually intend to follow through with small claims court action. (Refer to the sample letter.)

• Firm Opening: Grab their attention and get right to the point.

• Heavy Language: Nothing sets a serious tone better than a reference to some fine print or legalese in your contract or work order, especially if signed by the customer.

• Payment Demand: Say exactly what you want. Ask for a specific amount of money to be paid by a set date, or for some other specific action to be performed.

• Consequence: Towards the end of the letter, state your intentions and give your customer a potential “out.” (i.e., pay now and preserve your credit rating.)

• Close: Be polite and professional, avoid personal attacks. You want the other person to make a business decision: What are my risks of losing? How much time and expense does a defense take? Usually, the other party will decide it makes more sense to compromise.

• Enclosure: Enclose a copy of your invoice and/ or work order. In an involved situation, review the history of the dispute. If you do end up in court, the judge or hearing officer who doesn’t know the facts of your situation will read the letter.

• Mail: Send the letter by certified mail. This assures your customer that you mean business and provides a record of receipt.

• Fax: Send the letter via “Receipt Recorded Fax”. After faxing, print a confirmation report from your fax machine and attach it to your copy for proof.

TECHNICAL TIP: If your debtor is a corporation, mail or fax the letter to the Statutory Agent (call Secretary of State’s office to obtain), copying the debtor. If not a corporation, mail or fax the letter to an owner or partner, not the manager or clerk. Pull your credit application if you have one on file to find the names of owners, partners, corporate officers, etc. You want MAXIMUM IMPACT, and WHO you send it to can be more important than WHAT you are sending.

Your Final Demand Letter should contain the following elements:

- Firm Opening

- Heavy Language

- Payment Demand

- Consequence

- Close

Obtain a complimentary sample in MS Word at our Resource Center.

As a general rule in early collections, a phone call is ten times more effective than a written collection letter. This is mainly because at this stage a two-way dialogue is far more effective than a one-way communication.

But like many rules in collections, there are exceptions:

• You might need to send a first collection letter because you don’t have time to make all your calls that week.

• A letter will be less expensive than long distance calls to small balance out-of-town customers.

• If you do not have trained telephone collectors, it is better to use well-written letters and less telephone contact.

Your success rate using a letter with the format provided at the Stevens & Ricci Resource Center should increase drastically. The smaller the business you are sending it too, the more success you are likely to have. The larger the business, the less success you are likely to have.

What a First Letter Should Do

Your first letter should indirectly ask for payment by means of asking for the reason for non-payment. The sample format letter on the Stevens & Ricci Resource Center gives your customer the benefit of the doubt by asking for the reason for non-payment using check-box style common reasons at the bottom and making demand for a response to the inquiry.

Further, you are adding interest to the total, which gives you instant priority over most other creditors you are competing with for payment. On a judgmental basis, you can put “waived” instead of the interest amount for certain key customers, etc. letters for the most part are trashed and ignored.

The first letter should not directly ask for or demand payment. First, you are assuming that a payment is due. Many times, the customer has put the invoice on hold awaiting your call to discuss something they feel is wrong with your product, service, and/or delivery. In cases like this, most will not contact you –they’ll wait for you to contact them. Unless you know the situation, always give your customer the benefit of the doubt.

The important thing with a first contact letter is to not ask for payment, but to ask for the REASON FOR NON-PAYMENT.

Refer to the sample First Collection Letter. It identifies a problem, asks for a resolution or other information and provides a check-box style for replying.

This letter can be customized to fit the particulars of your business. You may want to add checkbox reasons for non-payment based on the more common excuses you receive in your business or industry. The sample letter can be downloaded onto your computer in MS Word at which point you can add your company’s logo and information.