Ask Bill your personal finance question

Information for Collections on Business Debt

We have $4,000 that is over 90 days past with a supplier. Will they take legal action for such a small amount?

We are a retail store and we bought merchandise on 30 day terms and then got behind when business was slow during the winter. We have $4,000 that is over 90 days past with one supplier but we have been in constant communication with them and have been paying them what we can at least monthly. We were able to come to agreeable terms with all of our other suppliers but this one. All others are now current with no issues but this one was our largest and not willing to work with us. We sent them (in writing) that we would pay them at least $500/month. They acknowleged receipt of the letter, did not turn it down, say it was not acceptable or propose any other terms. Now they have turned it over to a collection agency and they are threatening legal action. I can't beleive they will actually take legal action for such a small amount. Should I stop paying the monthly payment or hire an attorney to dispute the collection? We are in business as a partnership where I personally backed the terms but my credit rating did not have any impact on their extension of terms.

Read full question
Bill's Answer
4.3
/5.0
(7 Votes)

Bills.com | Find Learn Save

Since you do not have a written repayment agreement with this creditor, there is really nothing to prevent the creditor from pursuing collection activity, including possibly filing a lawsuit against you for the balance if the debt. While many suppliers will work with you to help you through difficult times in your business, creditors are generally under no obligation to work with you to modify the terms of your purchase contract. If possible, the best way to resolve this account is to simply pay the balance of the debt. However, if you are unable to pay the debt in full, you should continue your efforts to negotiate alternative repayment terms with the creditor. For additional information about debt and options available to those struggling with their bills, I encourage you to visit the Bills.com Debt Help page.

The fact that this account has been referred to a third party collection agency may actually work to your benefit, as the collector may be more willing to discuss alternative payment arrangements, such as a reduced-balance settlement or a longer repayment plan. I encourage you to contact the collector to try to negotiate repayment terms that you can afford. In my experience, collection agencies are frequently more flexible in working with debtors due to the fact that most collection agencies work on a commission structure based on the amount of money they collect. In their view, bringing in a small payment is frequently better than receiving no payment at all. Generally speaking, I discourage consumers from accepting any repayment plan without receiving the terms in writing from the creditor/collector. Without a written agreement, there is nothing to prevent the creditor from deciding at some time in the future that your payments are not sufficient and that it wants to pursue legal action against you.

As I mentioned previously, it is possible that this creditor could file a lawsuit against you to obtain a judgment on the debt you owe. If the creditor does file a lawsuit against you, you may wish to obtain legal counsel to represent you in court and to help you determine the best option available to you to resolve the debt. A creditor’s filing a lawsuit does not usually mean that the creditor is not willing to negotiate repayment terms, so even if the creditor files suit, you or your attorney should continue trying negotiate with the creditor.

I wish you the best of luck in resolving this debt, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.bills.com/blog

Get Debt Help!
4.3
/5.0
(7 Votes)

0 Comments

1500 characters remaining
loading...