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China Commercial Collection Lawyer's Job Has Never Been Easy

My friend came to me and asked: I have been retained to collect a debt owed by one company to another. As a former commercial collection lawyer and current debt defense lawyer, I was wondering if anyone has done any debt collection and can give me some ideas on what efforts they take prior to actually filing a claim.  It doesn't seem as if they will have a real defense because they made some payments initially and then just stopped.

I replied: I'd put together a demand letter that spells out what you are requesting in as much detail as possible, and then provide a drop-dead date for a response. Make sure to close it with "Govern yourself accordingly."

I would do as much background research in to the debtor company as possible so you know things like what assets they have, where those assets are, what corporate entity owns those assets, who the principals at the company are, where they live, etc. I don't do much company collection, but individual debtors can get very creative in trying to hide assets and avoid being found. it depends on the debtor, but things can happen very quickly once the debtor realizes someone is pursuing them.

If the company is fairly big and well-established, then I'd say the risk of them suddenly closing up shop and disappearing is fairly low. However, I have seen some closely-held corporations (e.g. small businesses where all the principals are from the same family) suddenly vanish. If you know where the principals are, I wouldn't be surprised if they were suddenly running the business out of their house, operating the same business under a new name, etc.

It might depend on the state, but I'd also look up the procedures at your court and sheriff's department on how to actually file things (and the associated fees) like levies, till keeps, execution writs, etc in case you need the sheriff to do something really quickly.

Hope that helps. Debt collection is hard, but at times it can be loads of fun too. There are several things you need to do:

1.  Carefully obtain documents and interview the client.  Omissions can be critical.
2.  Generally, an appropriate demand, tailored to the matter is the first step.
3.  Failing payment, filing lawsuit is next.
4.  Sending discovery when an answer is received is appropriate.
5.  Obtain summary judgment if available.
6.  Consistent with local practices, short fuse the trial.

If starting out with this type of matter, be careful of clients who don't have all their paperwork together or won't take the time to answer questions.  It is a practice area where some omit significant information.

If the client has purchased the debt from somewhere else, additional caveats apply.  Ditto with pure contingency contracts on debt collection, as you need to be comfortable with processes of client to my view before considering.

Commercial collection work is virtually an important part of my entire practice. It is not rocket science (hence, the likely reason I engage in it).

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I am a licensed China lawyer. Most clients are foreign nationals and companies. China Lawyer Blog have associates in Beijing, Shanghai, Tianjin, Guangzhou, Suzhou, Nanjing, Qingdao, Fuzhou, Hainan, Hefei, Wuhan, Xian, Changsha, Xiamen and Hangzhou. Learn More

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China Lawyer BLog AuthorPeter Zhu, an experienced China attorney licensed to practice law for more than ten years, the author of this China Lawyer blog, welcomes any enquiry or consultation related to Chinese law.