2009 hot legal topics.collecting receivables

COLLECTING MONEY COLLECTING MONEY IN A REBOUNDING IN A REBOUNDING

ECONOMYECONOMY

AGENDA

• Part I - Creating Accounts Receivable

• Part II - Managing Receivables

• Part III – Pursuing Unresolved Balances

PART I – CREATING ACCOUNTS RECEIVABLEUNDERSTANDING RISK!!!

RISK DEFINED

Definition: The precise probability of specific eventualities.

RISK – EXAMPLE OF ED VIESTURS

ED VIESTURS AND BARACK OBAMA ON RISK

• Ed Viesturs - “In mountaineering you have to make some tough choices based on success and non-successes. The most basic, is: Do I go forward or not? … you might get away with it once or twice in business or in the mountains, but sooner or later it’s going to catch up to you. And you can’t become complacent and say, I got away with it once, I’m going to try to get away with it again. That becomes pretty dangerous.” (3/12/09)

• Barack Obama – “We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences…” (9/14/09)

CONTRACT WITH CAUTION

– Credit Limits • Carefully Set• Continuously Reviewed

– Signed Contract

– Prompt and Clear Invoicing

– Contractual Provisions• Interest• Attorneys’ Fees

PART II: MANAGING ACCOUNTS RECEIVABLES –

CURRENT TRENDS

FOUR “P’S” OF COLLECTIONS

• Polite• Professional• Practical• Persistent

REGRESSION TOWARD THE MEAN TOO GOOD TO BE TRUE ~ REALITY CHECK

Definition: Statistical phenomenon that a variable that is extreme on its first measurement will tend to be closer to the center of the distribution on a later measurement.

REGRESSION TOWARD THE MEAN CONT.

• Game I – W. Kentucky– 21/28 Passing– 233 Yards– 5 Touchdowns!– QB Rating 109.1

• Game II – UCLA– 13/26 Passing– 93 Yards– Three Interceptions and

a Fumble– QB Rating 19.1

REGRESSION TOWARD THE MEAN

Jonathan Crompton - Return to Mediocrity

0

20

40

60

80

100

120

140

160

180

QB

Rat

ing W. Kentucky

UCLA

UCLA

UABFlorida

Auburn

USCWyoming

Vandy

Kentucky

ANATOMY OF A BUBBLE

PART II – SECURING RECEIVABLES TOOLS OF THE TRADE

• Deed of Trust• Confession of Judgment• UCC-1 Financing

Statement• Financial Guarantee Bond• Bank Letter of Credit• MVR-6 – Vehicle Title• Personal Guaranty• Corporate Guaranty• Joint Check Agreement

DEEDS OF TRUST

• Publicly filed with the local Register of Deeds• Pros:

– Absolute security interest in real property– Survives in bankruptcy so long as it was filed

more than 90-days pre-petition• Cons:

– Subject to priority– Liens can vault in front of a deed of trust– Can be wiped out in foreclosure by a senior

lien holder

UCC-1 - ALTERNATIVE SECURITY

Secure the following:– Vehicles– Equipment– Accounts Receivable– Inventory

MECHANIC’S LIENS – TYPES

– Real Property• Deadline - 120 day filing; 180 day enforcement;• Priority – First day improvements provided

– Personal Property • Motor vehicles• Water vessels • Available for someone who tows, alters, repairs,

etc.– Self-Service Storage Facility

• Aircraft

THIRD-PARTY SECURITY

• Letter of Credit• Individual Guaranty• Corporate Guaranty• Surety Bond• Assignment

PART III –UNRESOLVED BALANCES DEBTOR STRATEGIES

• Face It• Fight It• Ignore It

– Judgments

– Bankruptcy

STAGES OF A LAWSUIT

• Pleadings• Discovery• Dispositive Motions• Judgment / Appeal• Execution

JUDGMENTS

• Attach to all real and personal property within each COUNTY the Judgment is docketed.

• Post-Judgment Payment Plans – proceed carefully• Is a Confession of Judgment “Security”?

– This answer is technically “NO”– A Confession of Judgment provides “security”

to the extent that with it you have assurance of not having to go through the drafting, serving and default/judgment processes of litigation

– In the event of a bankruptcy, it offers no security until filed

BANKRUPTCY

• Unsecured v. Secured Debt– Guaranty– Confession of Judgment– Promissory Note

• Preference– 90 Day Threshold– $5,475 aggregate threshold– Possibility of Voiding Deeds

of Trust

THANK YOU!THANK YOU!

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www.vannattorneys.comwww.vannattorneys.com

1720 Hillsborough Street, Suite 200 | Raleigh, NC 276051720 Hillsborough Street, Suite 200 | Raleigh, NC 27605

Tel: 919-510-8585 | Fax: 919-510-8570Tel: 919-510-8585 | Fax: 919-510-8570

1200 East Morehead Street • Suite 251 • Charlotte, NC 28204 1200 East Morehead Street • Suite 251 • Charlotte, NC 28204

Phone: 704-496-7495 • Facsimile: 704-496-7480Phone: 704-496-7495 • Facsimile: 704-496-7480

www.vannattorneys.comwww.vannattorneys.com