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Business Debt/Confession of Judgment

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Expert: - 6/8/2009


Question
Confession of Judgment

I have a few business clients that I have provided consulting services to over the years that owe me money.   I have a signed business contract with each client.   Over the last few years they have been unable to pay for my services due to the economy and their debts have become pretty substantial.
Now things have turned around for these businesses and, although they promise to pay their debt, no money is forthcoming.
Rather than hire an attorney, since my funds are limited, a friend told me that a way to see if these people really intend to pay is to get them to sign a Promissory Note and a Confession of Judgment.  If they do sign the instruments then I would not have to hire an attorney to bring law suits against them to collect my past due fees.
I’ve read that Confessions of Judgment for commercial transactions is legal in Pennsylvania.
My questions are:
1)   Do I need them to sign a Promissory Note if I already have a contract with each client?
2)   Can I use a model Confession of Judgment that was used in a Pennsylvania county?
3)   How can I find out how to proceed without incurring a lot of expense.
My concern is that a number of years ago I hired an attorney to sue a client that owed me money.  The law suit was successful in that we got a judgment against the bank account he used for payroll.  After spending a lot of money the client declared bankruptcy, and being an unsecured creditor, I got pennies on the dollar; not nearly enough to cover my attorney fees.
I have also been in a situation where a client paid me and I had to return the money because two months later he declared bankruptcy.
How would you recommend I proceed with the current situations?  

Answer
Steven,
1.  You don't need them to but if they signed a contract as a business entity, you cannot go after them personally for any debt. If they sign a promissory note or a personal guarantee you may be able to attach personal assets if you obtain a judgment.
2.  I do not have any knowledge about this, i would check with the courthouse or a local attorney.
3. It depends on what you want to do, if you want to obtain a judgment you can take them to court right now, or anytime you wish, then obtain a judgment and then proceed to try and collect. You can ask them to sign more documents or just pay the bill etc.

If a company files bankruptcy, there is nothing you can do, that is a cost of doing business. Good luck!

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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.

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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

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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.

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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.

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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.

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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.

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