In times of crisis, indebtedness between citizens and companies increases. People and companies suffer from a lack of financial resources, inflation leads to impoverishment, which in turn leads to the inability or unwillingness to fulfill monetary obligations – loan repayment, penalty payment, down payment refund, invoice obligation, etc.
Creditors in such situations often turn to a lawyer when they are unable to get the defendant to pay the amount owed on their own. This is a correct approach. In many cases, it is even more appropriate for individuals to seek legal advice before taking action on their own. Why this is so will become clear below.
What are the mistakes that are often made in an attempt to collect an amount owed /including by some lawyers/:
- Being overly passive in trying to avoid being sued. Sending numerous invitations, threatening messages, proposals for settlements, etc. This approach gives the debtor the opportunity to maneuver, prepare for a possible lawsuit, dispose of assets and, in general, make it difficult for the creditor to take subsequent actions, including and on enforcement.
- Unreasonable aggressiveness. Here, the situation is exactly the opposite – it is acted hastily, which leads to the accumulation of unnecessary expenses and to the unnecessary straining of relations between the parties, which in another development could continue their relations. It should not be forgotten that anyone can happen to get into debt, and it is not necessary to almost arrive at decisions style “Merchant of Venice”.
The errors in question come from improper ANALYSIS and/or improper STRATEGY performed by the lawyer.
- The analysis should mainly consist of two parts. One is dedicated to what kind of relationship the creditor and the debtor are in; what the obligation arises from; is the party ready to compromise; what actions were taken at the time of the consultation, etc. The other part should focus on the debtor’s personality and property status – whether it is a natural or legal person /what kind/; what activity it develops; what property does he have; are there any counterarguments with which to dispute the claim, etc.
- The strategy must be carefully constructed. Of course, it depends to a large extent on the lawyer’s experience with similar cases, on his approach, on the way of communication, on his ability to predict the defendant’s moves. The strategy should be consistent with lawyer ethics – to achieve an effect for the client in the most direct and fastest way for him, with the least possible risk. Proper analysis largely determines strategy. It is good for the strategy to include all the steps, from the best to the worst case scenario, so that the client is aware of what the options are, what the costs will be, what to expect and what to watch out for.
From a practical point of view, different legal figures can be applied to collect a monetary claim – one after the other, in aggregate or separately. Such can be – sending an invitation – by courier, telemail, e-mail, notary or private enforcement agent; conducting negotiations; submitting an application for security of a future claim; submission of a claim together with a request for the admission of collateral; simply filing a claim; submission of an application for the issuance of an enforcement order.
In many cases, an effective solution is to ask the court to allow a future claim to be secured by attachment of receivables /bank accounts/ or foreclosure of real estate. This method has serious advantages – a pre-emptive effect preventing the debtor from hiding assets; blocking effect – difficulties in the debtor’s activities due to the seizure of accounts, etc. Oftentimes, the admitted security leads to an agreement between the parties already within the deadline for filing a claim – which in turn leads to savings in time, costs and energy.
This article reflects the view of Att. Yasen Kraychev, is informative and does not constitute legal advice. Kraychev Partners law firm has extensive experience in the field of property law and real estate transactions. If you wish to hire us, do not hesitate to request an offer and do so.