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MN Contractors Should Act Fast to Collect Bad Debt

As Minnesota sits in the middle of winter, many general contractors use this time to reflect back on completed jobs from the previous year and start planning for 2016. Part of that reflection includes jobs that were completed but the balance remains unpaid. The Commercial Collection Agency Association says that the probability of collecting on delinquent accounts drops dramatically each month after the due date, from 81 percent after two months to 52 percent after six months. Here at Minnesota Construction Law Services, our attorneys have the tools to collect your debt quickly. 

Deciding the Best Course of Action

Not all collection issues are the same. The amount of the debt, your business relationship with the debtor, and what documentation was used in procuring the contract must be considered. Ultimately, there are two approaches for collecting a debt: mechanic's liens and court action. Each approach comes with advantages and pitfalls. Mechanic's liens expire after a year and cannot be renewed. Further, if the property owner doesn't pay, the contractor must initiate a foreclosure proceeding before the lien expires to recoup what's owed them, a costly proposition at best. We covered the mechanic's lien process in detail last month on this blog, read more about it here.

Court action happens after a non-response from a debtor or, if the debtor is dissatisfied with the work, a demand letter could open the door to potential litigation regarding the financial dispute. Extended litigation can prove costly and, depending on the amount unpaid by the debtor, may not be worth pursuing.

Putting the Law to Work for You

Minnesota Construction Law Services' attorneys will first gather all the relevant information regarding the outstanding debt and discuss the best and most efficient course. Once we determine the best way to collect on an unpaid balance, we immediately move forward with collection activity.

If recording a mechanic's lien is the best course of action, that process includes pulling an Owners and Encumbrances report, initiating a foreclosure action, and preparing and serving a summons and complaint. The goal is to get our client paid in full from the owner, but we'll take the house and sell it to get the money from the proceeds if needed.

If proceeding via court action is the appropriate path, our concise process starts with communication via mail with a letter demanding payment. All of our communication with debtors follows the Fair Debt Collection Practices Ac. The etter from Minnesota Construction Law Services makes clear that further legal action is imminent if there is no response.

Many collection companies try to lean on debtors with multiple letters and phone calls. This is not only ineffective most of the time; it wastes valuable time and lowers the odds of collection. If no payment arrangement is achieved after our letter, we move swiftly to obtain a court judgment, then garnish wages and bank accounts to collect the money you are rightly owed. Unlike a letter or phone call that can be ignored, a court summons motivates debtors.

Payment Options

If you are using Minnesota Construction Law Services' contract sets, your clients should be responsible for costs incurred to collect a debt. Costs to collect a judgment are not collectible by law, but post judgment interest is.

We offer legal protection plans that may include debt and judgment collection with no additional cost. We also offer a contingent fee, which means there is no cost unless our you collect. While there is no fee if we don't collect, the cost as a percentage of the collection may be a little higher than with an hourly fee. Our hourly fee could be less expensive as a percentage of the debt collected, but requires payment regardless of whether we are successful in recovering your money.

Regardless of which payment option our clients choose, they are always responsible for any litigation costs and attorney's fees incurred.

Contact Our Attorneys to Get Started

If you completed a job and remain unpaid, contact one of the attorneys at Minnesota Construction Law Services today. By the end of a conversation with one of our attorneys, we'll have a course of action and be ready to take the first step towards getting you paid. The longer the debt remains due, the less likely the chances are for a successful collection. Be sure to contact Minnesota Construction Law Services today so you can move forward with confidence that you will be compensated fairly for your work.

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