Category Archives: Debt Collections

Be Smart — Whether You Are The Hunter Or The Hunted

M&M Liens - Texas Property Code

A. Lewis Ward assists small business contractors with debt collections enabled by M&M Liens

The recent experience of two clients illustrates the advantage of having and the disadvantage of not having a mechanic’s and materialman’s lien (M&M Lien).

Subcontractor Who Benefits From An M&M Lien

A gentleman came to me having completed work as a subcontractor on a commercial project, yet he was unable to get paid. As a first step toward securing payment, A. Lewis Ward & Associates prepared and delivered to the general contractor and to the property owner, in accordance with Chapter 53 of the Texas Property Code, Subchapters A-E, notice that the unpaid balance was due but not paid. Due to a disagreement with the general contractor, the property owner retained the funds and would not pay my client directly. Why?

If the owner paid either the general contractor or my subcontractor client directly, he would be exposed to a lawsuit from the other.

The next step to secure payment for my subcontractor client will be to file suit against the owner to foreclose on my client’s M&M Lien and against the general contractor for breach of contract. At that point, the owner will likely tender the funds into the court’s registry, which will make those funds available to pay my client for the judgment I expect to obtain against the general contractor. Thus, we avoid chasing a general contractor who has no assets, and the lengthy process of foreclosing on a high-priced piece of real estate.

Contractor Who Suffers From Lack Of An M&M Lien

The flip side of this coin is exemplified by another client who came to me for help in collecting funds due for residential roofing work. This contactor’s contract did not comply with the Texas Property Code, and thus, did not support a viable M&M Lien.

The homeowner refuses to pay and, now, the contractor must sue the homeowner in a standard breach of contract action without the benefit of an M&M Lien.
Had our client’s contract been properly prepared and the transaction handled as required by Chapter 53 of the Texas Property Code, our client would have a valid, enforceable lien. As a result, there is a good chance that the mere threat of foreclosure of the lien would have motivated the homeowner to pay the amount due, without a lengthy and costly court case.

Property Owners Be Aware

Contractors who furnish labor or materials to improve real property are protected under Texas business law by the provision known as a mechanic’s and materialman’s lien, which protects contractors, trade workers and suppliers with the ability to foreclose on real estate if there is compliance with the Texas Property Code.

Whether you are the hunter or the hunted, be aware of your rights and obligations under the Texas Property Code – it can save you money and a great deal of time!

With Overdue Debt Collections – Time Is Money

practical steps in managing debt collectionsThe old adage “time is money” is very true when it comes to overdue debt collections and accounts receivable. With few exceptions, the longer you delay overdue debt collections, the more trouble you will have collecting. If you have to extend credit, adhering to the following guidelines can put more money in your pocket and save you stress.

Be aware of the exact date your account receivable is due

If you do not receive payment by that day, you should immediately contact your debtor in writing to advise them that the account is past due and obtain a date certain within the next seven to ten days when you will receive payment. If you then do not receive payment within seven to ten days, or another specific date by agreement, contact them again in writing with stronger language insisting that payment is due.

Thirty days past due

Then, if payment is not made before the account becomes more than thirty days past due, send a letter advising that you will file suit against them if the account is not paid immediately, giving them a finite period of time to make payment.

Although the law does not require you to send this letter threatening suit in any particular manner, it is a good idea to send the communication via certified mail, return receipt requested. We suggest also sending a copy of that communication by fax, email and/or first class mail so your customer’s receipt of it is ensured and expedited. Too, some people think they accomplish something by refusing to accept or claim certified mail and substantial time may elapse before you learn that your letter was never accepted or claimed. Generally speaking, delivery is deemed to occur when an addressee refuses delivery.

Filing a lawsuit for overdue debt collections

This written demand also perfects your right to recover attorney’s fees for overdue debt collections. It is not necessary that you employ an attorney to present your claim to your customer. This can be done easily by you, thereby saving you the expense of attorney’s fees. In this letter, you should state that if filing a lawsuit becomes necessary, you will sue the customer for prejudgment interest due (this is a statutory six percent per annum rate in the absence of any contrary agreement), court costs, and attorney’s fees. If the account is less than $10,000 and you cannot or do not wish to employ an attorney, you can represent yourself when filing the claim in a justice of the peace court.

If you are engaged in construction or a related enterprise, timely management of your accounts receivable also helps you perfect your right to file a Texas mechanics and materialman’s lien (M&M Lien). In these professions, there are strict requirements that must be met in order to qualify to file the M&M Lien affidavit.

If your account is experiencing serious financial difficulty, their filing bankruptcy is always a possibility. You can reasonably infer that your account may be in arrears with other obligations also. Therefore, you may be in a situation of “early bird gets the worm,” dictating that you must proceed with all haste – “the wheel that squeaks the loudest gets the grease” is another old, but true aphorism!

Read more about debt collections and M&M liens

Haste Does Not Make Waste With Business Debt Collections

Timing Is Key In Business Debt Collections

“The wheel that squeaks the loudest gets the grease” is an old adage that certainly applies in tough economic times. Business debt collections can be considered a top management issue.

Business debt collections should begin the day your invoice is sent.You may do this by sending the invoice and then confirming that it was received.

Then kick debt collections into high-gear on the first day the account becomes past due. Should you ever need to go into litigation for debt collections, it is important that your invoices contain all of the following:

  • The name of the party(s) responsible for the account
  • A description of the goods or services provided
  • The per unit charge for the goods or services provided
  • The total amount due for the goods or services provided
  • The due date of the invoice

Your first step in debt collection may be Debt Validation.