It can be frustrating and at the same time bad for the business that when they loan money to an individual or another business, they do not fulfill the loan payments. Many lenders experience frustration and fear that a debtor, by stopping the loan payment, will never repay it. This is not always the case, however there are different ways for lenders to legally encourage debtors or companies focusing on financing lawsuits to pay their debts.
First Steps: Phone Calls and Bills
Most businesses send multiple invoices and make personal phone calls when a debtor stops making payments on time. If a buyer has a temporary problem such as a work permit or illness, then the approach may work and the problem can be resolved. Unfortunately, this is only true for a small percentage of borrowers, and borrowers are often not making regular payments on their loans because they simply don’t have enough money to do so. In that case, sending multiple invoices and phone calls will probably not be effective.
After you have made multiple phone calls and sent invoices, it may be beneficial to consider a loan restructuring or modification. A loan restructuring is the negotiation of an initial loan modification by parties, the lender and the debtor. It can include any terms agreed by both parties, such as a lower interest rate, the extension of the time to pay or forgive part of the main debt.
Litigation and Loss of Right to Redeem a Mortgage
Sometimes the measures outlined above are not enough and lenders need to go through more formal ways to collect on their defaulted loans. This often involves filing a lawsuit against the debtor to collect the money owed, or taking part in the debtor’s bankruptcy procedures to ensure that your loan has the priority due to you in the bankruptcy plan.
If you file a lawsuit like Baker Street funding against the debtor, then the Court can order the debtor to pay your debt according to a specific schedule and using money from a particular source. For example, the Court may require the debtor to sell specific property and repay its debt with those funds. Alternatively, the Court may require the debtor to use a certain amount of his monthly or weekly check balance to pay you back on the loan. If the loan document you are collecting payment on was well written, then it will probably contain a provision regarding attorney’s fees. This means that if you win your lawsuit, the debtor must pay your attorney’s fees.
Usually, the same attorney who represents you in your lawsuit against a debtor can help protect your claims if the debtor files for bankruptcy. It is specifically important that you have representation in bankruptcy proceedings because once the bankruptcy is discharged; you will probably not have any right to collect the debtor’s money beyond what is included in the settlement agreement bankruptcy.
Sometimes creditors must go to court to collect a defaulted loan. If you have not been paid the money owed to you, then you should consult with a collection attorney in your State to discuss your options.