Understanding Bankruptcy and Debt Collection Laws

Credit: RDNE Stock Project via Pexels

What happens when someone who owes you money declares bankruptcy? You didn’t do anything wrong, but suddenly, there’s a chance that the money you should rightfully collect money won’t come your way.

The legal protections around bankruptcy are considerable in different jurisdictions. Companies need some protection from risks they take in the market in the event their business goes south, and bankruptcy laws can give them this emergency buffer. However, while declaring bankruptcy can give them certain crucial protections, there are also costs associated with it.

Summit A*R is the best debt collection agency for helping clients navigate this complex and fraught legal territory, as we’ll help you maximize the amount you collect.

Automatic Stays

What do people or companies do when they owe more money than they have and declare bankruptcy? Many call for an automatic stay, a broad legal term that prohibits some collection activities. Legal action, garnishment, and even contact by phone or mail to collect a debt may be prohibited in reference to pre-bankruptcy debts.

However, there are exceptions in that it doesn’t apply to criminal cases, child support actions, and certain eviction cases. There are some assets that are exempt from collections, while others are not. We are experienced in navigating this space, so we know the lines to pursue and how to do it, and which courses of action will be dead ends.

No Negativity

With other companies, collections can be a fraught and difficult process. The people and companies who owe money struggle to find it, and this tension can make for uncomfortable and even hostile situations.

Summit A*R is very proud of our PHD philosophy, which stands for Preserve Human Dignity. We will never do the underhanded and aggressive tactics other collection agencies use, like robocalls or threats.

Sometimes, other collectors go even further offside, contacting relatives or friends of the debtor to pressure them to pay. We avoid this for a few reasons.

Companies owed money from clients don’t want to burn bridges with anyone they may work with in the future. Even if they never do business again, you don’t want any negative associations attached to your name.

Asking for money can be challenging and uncomfortable, even, or perhaps especially, if someone owes it to you. They may feel embarrassed about not having paid and try to dodge your call. It may sound odd or counter-intuitive, but there are psychological reasons people may avoid paying a debt, not just financial ones.

Credit: Mikhail Nilov via Pexels

Summit A*R nearly doubles the industry standard collection rate, so you don’t need to fear that our sensitive tactics that treat people with dignity translate to a smaller return. Indeed, the aggressive tactics more common in the industry are what don’t work — they’re ugly for the hostility they embody and the harms they cause, but even if you were indifferent to everything but the money, it would be the wrong approach. Keep your relationships positive and

Impeccable Compliance

It’s understandable that you want to collect as much as you can, as soon as you can. However, nobody benefits when the collection methods don’t fully comply with the law. Otherwise, things can get messy, or you could get dragged back into labyrinthine processes that end up costing you more.

Summit A*R has a perfect A+ rating from the Better Business Bureau, along with an impeccable compliance record from all regulating agencies nationwide.

You want to get your customers to pay and feel confident that you’ll recoup your money and that the money you get back will stay yours because the methods to obtain it were proper according to all laws and regulations.

Debts from Inside the Organization

What happens when the bankrupted debtor works for you? Debts can come from various places, even employees. How do employees come to owe their employers money? There are several common ways.

Employees may take job training or ongoing education courses that their employers pay for, only to abruptly quit. In such cases, they may be violating the terms of the original deal. After all, no business wants to pay to train someone who doesn’t work for them and may even join a rival company!

Maybe there was a technical glitch resulting in overpayment or personal expenses improperly filed as a business expense. We can help you recover debt from a former employee, even if they declare bankruptcy in an attempt to dodge it.

Sometimes confusion around processes can lead to employees making an innocent but regrettable mistake. It’s better to have a culture that promotes clarity around core processes related to expenses and benefits, but we’ll expedite the collection process if it’s too late and a former employee declares bankruptcy to avoid paying you what they owe.

Whether the debts arise from commission recalls, relocation expenses related to early termination,  uniform fees, or anything else, Summit A*R has your back.

Transparency Matters

Getting money owed back into your accounts is essential, but so is tracking the collection’s progress. Companies need to make short, medium, and long-term plans, which is impossible to do when they’re in the dark about where their money is.

We have a comprehensive client portal that provides a 24/7 window into payment activity, custom reports, and more. You’d rather skip the excuses for overdue payments and see at a glance where your money is.

You’ll feel personally reassured to know the money is on the way. It also gives you the certainty companies need to make economic forecasts, predictions, and plans for the future. Business requires an atmosphere of reliability which outstanding debts can undermine. You need transparency, so that’s what Summit A*R gives you.

There are complex laws governing the mix between bankruptcy and debt collection, but don’t feel like you have no recourse left if one of your debtors declares bankruptcy. Contact Summit AR and we’ll maximize the collection that should rightfully be yours already.