Managing past due accounts is a major job for all businesses. Those that are able to collect on past due balances will have a lower bad debt expense and could see an improvement to profitability. When looking to collect on a past due account, pursuing debt litigation with the assistance of an attorney could be a great option. This could benefit your business a number of different ways.
Bring Parties to the Table
One of the main reasons why you should pursue debt litigation if you are struggling to collect on a past due debt is that it will bring all parties to the table. One of the biggest challenges that a business can have when it comes to collecting a debt is getting the attention and focus of a debtor. In many cases, the other party could simply ignore you repeatedly.
If you have use a professional for commercial litigation in Toronto file a lawsuit for you, the other party will be obligated by law to attend the court session. This can be a great way to bring all of the parties to the table at the same time to negotiate a repayment plan.
Improves Collection Rate
Another way that going through the debt litigation process can affect your business is that it can improve your collections rate. Bad debt and uncollectible accounts are a major expense that can be the difference between making and losing money. Because of this, you will need to take as many steps as possible to collect on your debt.
In many cases, once you pursue a full legal remedy through a debt litigation case, the other party will be willing to negotiate with you outside of the courtroom. This can then greatly improve your chances of collecting the debt without actually going through the full legal process.
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Enforces Repayment Plan
Another reason why going through the debt litigation process can be good for your business is that it will enforce a repayment plan. If the judge deems the other party to be liable for the debt that they owe, they will likely create an enforceable repayment plan.
In some situations this will include paying all of the past due balance at the time of the judgment. In many other cases, the other party will be able to enter into a repayment plan. If they fall behind on the repayment plan, it could give you the right to seize assets or pursue further remedies.
Finally, the fourth reason why it would be a good idea to pursue debt litigation is that it can have an impact on your reputation. News of a debt litigation handled through he public court system will become public record. If you are able to show that you can collect past due amounts through this process, it will show that you are serious about collections and payments being made on time.
This can give you a better reputation with working capital lenders and will decrease the chances that a debtor will take advantage of your business in the future.
In conclusion, maintaining a strong collection record is very important for any business. In situations where a debt appears uncollectible, pursuing a debt litigation could be a great option as it could benefit your business several different ways.