When Should A Collection File Be Moved Into Litigation?

Clients often ask lawyers at TCLG if it is appropriate to move a collection file into litigation and under what conditions. As lawyers who specialize in commercial collections the key to our success in collection matters is the ability to impose real or perceived consequences upon debtors. These real or perceived consequences are that the debtor will be sued if they do not arrange to pay off amount s due to creditors. If a debtor has assets to protect, more often than not, the collection matter will be resolved without litigation. At TCLG we work real hard to resolve collection matters amicably without litigation. However there are instances when amicably collection efforts just do not work and more forceful litigation is necessary. Below are factors to consider when deciding to move a collection matter into litigation.

  • The debtor has assets to protect but does not believe the creditor will pull the trigger on litigation.
  • The amount in controversy exceeds $10,000. The $10,000 threshold is a general rule based on the economics of litigation.
  • The debtor does not appear to want to file for bankruptcy or close it’s doors.
  • The creditor is able to designate someone in the organization who has time to work with counsel during the pleading process, the discovery process and the pre and post trial process.
  • Someone at the creditor with information about the matter will be able to, if necessary, appear at the trial as a witness to present the creditor’s case.
  • It is clear that the debtor is liable for the amount due.

Litigation is an important piece of the collection process and should be used in certain circumstances when amicable collection efforts have stalled.


Collection Tip

Creditors should move collection matters into litigation when the amount in controversy justifies it, when the debtor appears to have something to protect, when the creditor can dedicate the proper resources to the litigation and when it is clear the debtor is liable.

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