You are here:

Business Debt/Collecting debt on a business that has since changed owners

Advertisement

Expert: - 6/4/2008


Question
Hello, I work for a small nonprofit that also has a small retail arm.  In the past couple of years one of our customers had established a very bad practice of not paying debts until it was time for her to make another purchase order with us.  So, this year, this company again called to make another order and I inquired about the payment of the outstanding balance from July 07.  The company's purchasing manager informed me that the business is now under new ownership and that the new owner is no longer responsible for the business' debts accumulated by the prior owner as of May 1, 08.  We, as the creditors, received no notice to this effect.  My understanding is that if a person buys a business they also acquire the debt of that business unless arrangements were made prior to the purchase of the business.  As a creditor, I would have expected some sort of notice that the business was changing hands and how to collect on our outstanding debt.  Despite this, the new owners are claiming that they are not going to pay the outstanding balance as they are not the ones who made the purchase order in the first place.  The company has the same name, address, phone numbers, and employees.  Is the "company" responsible for this debt though the company changed hands, and if so, does that mean that the new owners are therefore liable?

As we are a nonprofit org, every little bit helps.  The fact that this company under whatever guise is refusing to pay on goods they purchased from us not only offends me in principle, they are effectively stealing from us.  Am I correct in the assumption that the new owners also bought the debt of the company in the conversion- particularly since we never received notice otherwise?

Thank you for your time and answering!

Answer
Stacey,
Ask the new owners if when they purchased the business, did they purchase the accounts receivables. If they did, they are responsible.  That information can be found in their closing paperwork.
If they did not, the old owner is responsible. Also, who signed or gave you the purchase order? Did you ever have any type of signed agreement, contract, credit application or anything? Who signed it?
I have to agree that the old owner not letting you know they were doing this is not very nice, I have had this happen to me as well.
Try these things and if you still don't get anywhere please feel free to email me and I will be happy to help you again.

Business Debt

All Answers

Answers by Expert:

Ask Experts

Volunteer

Michelle Dunn

Expertise

As one of the Top 5 Women in Collections, one of the Top 50 Collection Professionals, and winner of the Business Excellence award, I can answer any questions about debt, debt collection, improving business credit, creating a credit policy, enforcing a credit policy and collecting on past due accounts. I can also answer questions in regards to starting a debt collection agency since I have been a bill collector for over 24 years, started and ran my own collection agency for 8 years, and maintain my 12 year old Credit & Collections Association for members of the credit & debt collection industry. I am also the author of the popular and award winning book "Starting a Collection Agency, how to make money collecting money" now on it's 3rd edition. This book has won a the Writers Digest self published award as well as the New York Book Festival Award. I am a repeat contributor to the Wall Street Journal, and have been featured on NPR, CNN, as well as many other national radio and television programs. I have also been featured in national publications such as the Wall Street Journal, Forbes, Smart Money, MSNBC and much more. I have 17 published books to my name and am an accomplished speaker and consultant. I currently write 9 columns for newspapers, magazines and online portals worldwide.

Experience

I have over 24 years experience in debt collection, I started and ran my own collection agency for 8 years and I am the founder & owner of my Credit & Collections Association that I founded in 1998. www.credit-and-collections.com

Organizations
My Credit & Collections Association, I was also a member of the American Collectors Association and Plymouth Chamber of Commerce for 11 years. I am a member of many writing groups as well as my local Women Inspiring Women chapter. I am a member of Know More Media as an expert for their blog on business credit.

Publications
Business NH Magazine, Smart Money Magazine, MSNBC, CNN, Forbes.com, The Wall Street Journal, Home Business Magazine, Entrepreneur Magazine and website, many books, newspapers and television programs as well.

Education/Credentials
I have written 17 books in my collecting money series and one for Entrepreneur Press called the Ultimate Credit and Collections Handbook. My newest book is being published by John Wiley & Sons in May titled, The Guide to Getting Paid, how to weed out bad paying customers, collect on past due balances and avoid bad debt. This book is also being sold to many colleges as a text book.

Awards and Honors
My book Starting a Collection Agency, how to make money collecting money won an award from Writers Digest and the 2007 New York Book Festival in the "How to" category. I have won 2 awards from Dun & Bradstreet and Governor Jean Shaheen. I was nominated as one of the Top 5 Women in Collections twice as well as having been selected as one of Collection Advisor's Top 50 Collection Professionals by my peers.

©2012 About.com, a part of The New York Times Company. All rights reserved.