When you’re attempting to collect a debt from a commercial customer, you know that every second counts. After all, the older the debt is, the harder it becomes to collect. When the traditional letters, phone calls, and negotiations fall short, it may be time to consider filing a debt collection lawsuit against your customer.
Filing a claim for unpaid debt in civil court can be a complex, time-consuming process. You may have already hired a third-party collection agency, which has recommended litigation as your best option for collection after their own collection efforts proved unsuccessful.
With the help of an experienced collections attorney, serving legal papers on a debtor can be the first step to collecting the money you’re owed.
What Is Process Service?
Process service is often the first step in notifying a debtor that a legal action has been filed in court. At this point, a process server hired by the plaintiff’s attorney will serve the debtor with the initial complaint, as well as a summons to appear in court to respond. Once the debtor is served, they will need to respond to the complaint to avoid having a default judgment entered against them.
How Process Service Works
To properly mount a successful case against a debtor, you’re required to serve the court papers on the business you’re suing. The right person to serve in the company depends on the structure of the organization:
- Sole proprietorship: Owner
- Partnership: At least one partner
- Limited partner: Partner who runs the business or agent in charge of service of process
- Corporation: An officer or the agent in charge of service of process
- Limited liability company: An officer or the agent in charge of service of process
Once you have figured out the right person to serve in the company, you’ll then move on to choosing a method of service.
Always check with the court clerk to ensure your method is acceptable. Generally, you’ll have four possible options for serving the defendant, which include:
Sheriff or Process Service
You may have the court handle the process service, which is either done by the sheriff or a third-party process server.
Certified or Registered Mail
If the business isn’t local or doesn’t have a physical location, you may opt to serve the papers via certified or registered mail if your state allows this. When you serve someone by mail, you’ll send it to the proper officer or owner in charge of the organization or the business’s registered agent in charge of service of process. Corporations, limited partnerships, and limited liability companies are required by law to designate an agent who accepts service of lawsuits. To find the registered agent for the company in question, visit the Secretary of State Business Entity Search for the state in which the business is located.
Certified mail requires a signature from the recipient and provides proof of when the package was delivered. For an even higher level of security and tracking, you may opt for service via registered mail. You’ll be able to keep tabs on exactly where the papers are in their journey through the post office.
Service by Publication
In some states, you may be permitted to serve the debtor by publishing the notice in an advertisement, newspaper, or other local media outlet. You should only use this option as a last resort when all other attempts to serve the debtor personally have failed.
Self-Service
Another option is to serve the papers via self-service, which means you’ll personally deliver the papers or hire a third-party process server.
How Process Service Can Assist Collections
If you’ve already spent a lot of time and money chasing after a sizable unpaid bill, litigation may be your best option for repayment. These are some of the key benefits of using process services to assist with collecting unpaid bills.
Provides Legal Confirmation That a Debtor Received Notice of a Lawsuit
Whether you use a sheriff or a third-party process server, you can rest assured that they will follow the correct process for serving legal documents on a debtor on a timely basis. The process server will provide an affidavit of service or proof of service, which will then be filed with the court as required.
Heightens the Stakes
Even if a B2B customer ignores traditional collection tactics, receiving a notice of lawsuit can finally get their attention. The summons typically advises the debtor that they have a certain number of days to respond, such as 20 or 30 days, before a default judgment will be entered against them. If the commercial debtor wants to avoid litigation, this may prompt them to hire a lawyer and negotiate an out-of-court settlement.
Can Help You Find Difficult and Nonresponsive Debtors
Experienced debt collection attorneys have the resources to find difficult, non-responsive debtors, even those who evade service of process. When a business owner or officer avoids service, professional process servers can make notes in their file detailing the service attempts. Those notes may eventually show up in a court affidavit, which can be another strike against the debtor.
Compels Debtor to Respond
Once you serve a debtor with the complaint, the business is legally required to respond to the lawsuit and appear in court. Ignoring the lawsuit can result in a default judgment, which means the court will automatically rule in the plaintiff’s favor.
You Can Hold Individuals Personally Responsible
Depending on the structure of the company, you may be able to hold owners or partners individually responsible for the debt — and the court could seize their assets to pay the debt. For example, in cases where the business is a sole proprietorship or partnership, owners and partners can be held personally liable for business debts. Sometimes, you can even go after a corporation or LLC owner if they personally signed their name on the contract. Or, if the owner signed a personal guaranty, you could also hold them personally responsible for the debt.
Other Considerations
Securing a judgment against a debtor isn’t a guarantee that you will receive the money you’re owed promptly. That’s why it’s important to work with a collection attorney who can help you evaluate whether there’s a good chance of collecting the debt and if it’s worth the substantial court costs and time investment. Some of the questions to consider include:
- What is the company’s financial status? Will it still be operating by the time we secure a judgment?
- Is the company in danger of filing for bankruptcy?
- Could any of the business owners or partners be held personally liable for the debt? If so, will we be able to locate them?
- Does the company have any other liens or judgments against it (which could complicate collection efforts)?
It may seem impossible to collect from certain B2B debtors. While litigation isn’t a strategy that should be taken lightly, it can sometimes be your most powerful tool for collecting unpaid debts. When you hire an experienced collections agency, you can maximize your chances of recovering delinquent accounts. If the collection agency exhausts its efforts to collect the debt — and recommends filing suit — the agency may start the legal process on your behalf or forward the account to a debt collection law firm.
