Magazine article Business Credit

The Winning Story Is. Deliberate Debtor Pays Big Price

Magazine article Business Credit

The Winning Story Is. Deliberate Debtor Pays Big Price

Article excerpt

I have pursued many debtors over the years, including high profile cases where millions of dollars were owed. But it took one small balance debtor to educate me about certain debtors who make a tidy little business for themselves by deliberately incurring low balance debts. I had a big laugh in the end on how I dealt a blow of my own to one such scam artist.

My client's firm did construction for new housing developments as well as contracting out work for new additions to their customer's homes. Therefore, my client would hire out contractors who would do the work and collect the money from the homeowner on site. Unfortunately, a common problem in this industry was that the contractors would collect the money, pocket it themselves, and never pay the company that got them the job in the first place. These contractors would often state that it was the homeowner who never paid them, which of course was almost always untrue. In this case, the contractor/debtor owed $700. He claimed the homeowner had never paid him. We first went to the homeowner and got a copy of the cancelled check, which of course was signed by the debtor. This debtor was arrogant and rude, and dodged all of our collection calls. Often we would know it was the debtor himself who answered the phone, but he would claim that "his partner" was out of town, etc.

After a couple months of runaround on the phone and unanswered demands, I told my client we could take him to small claims court, but it may not be worth it considering how small the amount was that was owed. My client was adamant that she would pay whatever fee to sue. At first I thought this might just be her frustration talking. I said, "Look, I know this guy is really arrogant, and I don't blame you for wanting to get him, but is a lawsuit in this case cost wise for your company?"

She explained that, in her business, contractors did this sort of thing ali the time and in this town where the debtor was located, they had over 20 contractors that they used. She said if her firm got the reputation of not pursuing their small balances that all the dishonest contractors would come out of the woodwork looking to do business with them so they too could take advantage.

Prior to suit, our attorney ran a credit report on the debtor and found that he owed a long list of debts, but all of them were under $1,000 each. None of the creditors had taken him to court, either. We realized our client was right--for this contractor, unpaid debts were merely a way to generate income! I mean, hey, if you steal under $1,000 from 20 companies in a row, and only one takes the time and money to pursue you in court, the other 19 debts are pure "profit" which is a pretty nice return (assuming you have no ethics).

We summoned the debtor to court and he did not show up. In this jurisdiction, he had two more summons to appear before the judge would give us a warrant for his arrest. After the third summons was a no show, we got a Sheriff's warrant to arrest the debtor. We were all excited that this slimy debtor would finally get his due. However, after two attempts to serve the warrant, the Sheriff's office said that he was never there at his office and gave up!

We were beyond frustrated. I spoke to the Sheriff's office and asked how many times they had gone, what happened, etc. …

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