Collecting on a Defaulted Promissory Note: What the Note Says, What the UCC Requires, and How Enforcement Differs from a Contract Suit
When a borrower signs a promissory note and stops paying, the creditor's enforcement rights depend on whether the note is a negotiable instrument under UCC Article 3 (Texas Business and Commerce Code Chapter 3) or an ordinary contract. If the note is negotiable, the creditor benefits from streamlined enforcement, a narrower set of available defenses, and the potential for holder in due course protection that insulates the creditor from most claims the borrower could raise against the original payee.
Read MoreDefending Against a Collection Action: What to Do When Your Business Is the Debtor
Not every collection claim is valid. Creditors file suit on debts that have been paid, on amounts that include unauthorized charges, on contracts the debtor has defenses to, and sometimes on debts the creditor doesn't even own. A business that receives a demand letter or a collection lawsuit shouldn't assume the claim is correct and write a check.
Read MorePrejudgment Remedies: Securing the Debtor's Assets Before You Have a Judgment
A judgment you can't collect is just a piece of paper. If the debtor spends the money, transfers the assets, or removes property from the state between the date you file suit and the date you obtain a judgment, your judgment may be worth nothing.
Read MoreSettlement and Structured Payment in Collections: When Taking Less Now Is Worth More Than Chasing a Judgment
A $150,000 judgment against a debtor who can pay produces a $150,000 recovery (plus interest, fees, and costs). A $150,000 judgment against a debtor who can't pay produces a piece of paper and years of enforcement costs.
Read MoreSworn Accounts in Texas: The Fast-Track Collection Procedure for Unpaid Business Debts
Most business creditors pursue unpaid invoices through a standard breach of contract lawsuit, which requires proving the existence of the contract, performance by the plaintiff, breach by the defendant, and damages. Each element must be proven at trial with admissible evidence, and the defendant can contest every element with a general denial.
Read MoreThe Collection Demand Letter: How to Structure a Demand That Produces Payment, Not Silence
A business that's owed money has usually sent invoices, followed up by email, made phone calls, and waited. By the time the conversation turns to a collection demand letter, the informal efforts have failed. A demand letter from an attorney transforms the dynamic because it communicates two things the prior communications didn't: someone with legal authority is now involved, and a specific consequence follows if payment isn't made.
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