RSSM Digital First Interview Edition December 2019 | Page 21

other people within the debtor company that things are not
going well but credit reports say everything is fine, Wilson says
to trust the people on the inside more because the information
will probably be more current. The information from cred-
it reports is delayed about 60-90 days. Wilson recommends
that somewhere between the “category 1 storm” and this one
is when you should escalate the unpaid debt to a collections
agency or at the very least get your attorney involved if you
want to get paid.
THE “CATEGORY 3
STORM”
is when the client/debtor has not paid beyond 60 days of when
they were supposed to pay, credit falls so low they cannot bor-
row anymore money to fulfill financial obligations, employees
start leaving and checks start bouncing. There is still a 71% that
the debt will be paid in full but by this point it’s going to take
some extra work. That is why Wilson says this is the situation
where the lawsuits start popping up by creditors trying to force
the debtors to pay. He does not believe that is the best way to
get paid though because of how long it takes a creditor to get
a judgement (assuming they get it at all) via the legal system;
typically 10-12 months. He says in the meantime, companies
still have money coming in to a certain extent and if the unpaid
debt is raised to collections instead then the process can result
in most or all of the debt being paid. By filing a lawsuit, even if
the creditor receives a judgement in 10-12 months, it is likely
that the debtor company will be out of business by then, which
makes the judgement worthless which means the creditor
receives zero of the unpaid debt. Wilson recounts a story where
this exact thing happened and the creditor thanked Wilson
for his advice and assistance recovering all of the debt before
the debtor went out of business within the 12 month window.
Unlike the previous “category 2 storm” where you should esca-
late the debt to a collections agency, this situation is where you
must escalate if you want to get paid. Samantha adds another
problem with the lawsuit route at this point; it has to stop as
soon as the company files for bankruptcy.
THE “CATEGORY 4
STORM”
is when the debt is more than 90 days past due, the client is
experiencing mass layoffs, and there is only a 48% chance of
getting paid. Escalating the debt for collections at this point
will mean that the collections agency can attempt an accel-
erated collections process for a week or 2, but beyond that a
lawsuit will probably need to be filed because that is the only
option left. Samantha recalls that some debtor clients in this
situation will resort to drastic measures, such as moving offic-
es, to survive.
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THE “CATEGORY 5
STORM”
are the worst and signify a client company is literally not in
existence anymore. Bankruptcy has already been filed, the
company was sold, the company was liquidated, or all of the
above. There is only .37% chance you will get paid at this stage.
Wilson says that even if you know where the owner or officer of
the defunct company lives, or where the new company is located
if they started a new one, that does not matter much. The only
thing that would matter is if you previously got the owner or
company officer of the now defunct company to sign a personal
guarantee. A new company would be a separate legal entity and
not responsible for the debts of the defunct company, even if
the owner is the same. Samantha says there are some rare legal
maneuvers that you can attempt, but they are not likely to work.
So what can you do to safeguard yourself from all
of these financial storms? Unlimited free credit
reports from AER can help you stay ahead of the
curve. Lastly, Samantha says to keep an eye out
for the checks coming from a client company to
see if the bank is the same. If they’re from a dif-
ferent bank it could be an indicator that the client
company changed banks for not-so-good reasons.
For more information, send an email to Wilson@
aercollections.com or Samantha@aercollections.
com, or call 800-452-5287, ext 6578.
2 KEY QUOTES:
• Keeping your documentation organized and
accessible is very important. You do not want to
be the company that raises an unpaid invoice to a
collections agency but doesn’t have any documen-
tation showing the invoice was sent to/received by
the debtor, any documentation of the work actu-
ally being done, or doesn’t even have the original
contract.
• Wilson recommends that somewhere between
the “category 1 storm” and the “category 2 storm”
is when you should escalate the unpaid debt to
a collections agency or at the very least get your
attorney involved if you want to get paid.
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