by Shawn McClure

When a collection claim results in litigation, a creditor must become familiar with certain legal concepts that will often determine whether or not the creditor sees any recovery as a result of the lawsuit.  One such legal concept is the “burden of proof.” 

In all civil litigation, the burden of proof requires the plaintiff, the creditor, to convince the trier of fact (either a judge or jury) of the plaintiff’s entitlement to the relief being sought.  The plaintiff must prove each element of its claim, or cause of action, in order to recover.  In other words, the initial burden of proof is on the plaintiff to show the court why the defendant/debtor owes the money. 

The underlying legal cause of action in a collection case is typically for breach of contract.  Generally, a plaintiff must show: 1) the existence of a contract and its essential terms; 2) a breach of a duty imposed by the contract; and 3) resultant damages.  This is why it is critical that a creditor keep meticulous and detailed business records, which can be used to meet the plaintiff’s initial burden of proof.  

Invoices between the parties can be offered as evidence of the existence of a contract between the parties.  The breach is the defendant/debtor’s failure to pay according to invoice terms.  Lastly, the plaintiff/creditor has been damaged because they have provided goods to the defendant/debtor and have not received payment.  Seems simply enough, but one would be surprised at the number of creditors who do not have or simply do not feel they should be burdened with having to produce such supporting documentation for the court. 

Keep in mind that when your attorney asks you to provide documentation of the claim against the debtor, he or she is not questioning the merits of your claim, but rather preparing to meet the burden that the law has placed on you as a plaintiff in a civil action.  Also, if you havent realized it by now, simply stating that the debtor knows they owe the money will not suffice.    

By Shawn P. McClure

“They stole from me!” “I am not taking a penny less than the full amount owed!” “I want to nail that son of a b#@^$!”  Often creditors engage an attorney to recover an amount owed from a debtor, and the creditor feels betrayed or wronged by the debtor.  It doesn’t matter whether the account debtor is a long time customer who has ignored demands for payment or a one time credit sale; these feelings of animosity toward that individual or entity are still present.  If not checked, these feelings can boil over and lead to unproductive or unnecessary litigation that only ends up costing the creditor more time and money.     

As with any service industry, one of the first duties of a creditors’ rights or bankruptcy attorney is to monitor, deal with and ultimately manage client expectations and emotions.  I would suggest that the first thing that needs to be done is to get your client in an “economical mindset.”  A creditor needs to realize that when a debtor files bankruptcy or the creditor is forced to place an account with a law firm for collection, then the account is already a loss.  For a creditor’s rights attorney the goal then becomes finding the best way to mitigate that loss and obtain the most favorable resolution for their client.

Therefore, every decision during the “recovery” process should be analyzed while taking full account of the economical consequences of that decision.  No where is that more prevalent then when deciding whether or not to initiate litigation.  Immediately filing a lawsuit without a preliminary asset search or investigation into the financial stability of your debtor can turn out to be the most counterproductive thing a creditor can do when trying to be made whole.  Likewise continuing to pursue litigation when it is obvious that there is no financial recovery to be had can only hurt a creditor’s bottom line.

Sounds simple enough.  Why do creditors continue to fall into these same pitfalls?  Emotion.  Creditors become too focused on “punishing” the debtor, and lose focus of the end goal.  Money. 

Luckily, the problems outlined above are easy to remedy.  Creditors, heed your attorney’s advice and try to avoid focusing on the emotions involved in the dispute at hand.  Attorneys, take control of the situation and make it clear to your client that pursuing certain avenues, while emotionally satisfying, will simply lead to the loss of more time and money. 

I understand that sometimes a message needs to be sent, but for those creditors who seek truth and justice in a failed creditor/debtor relationship, I would suggest visiting a house of worship.  It will be less expensive and they may have better luck.