Expert: Regan Shinski - 9/22/2009

Question
Hi,
I got a call today from a collection agency about an old bill(2006) incurred by my company. We are incorporated. She stated though she wasn't threatening me, but that they could put a lien on my property if we couldn't come to an arrangement. The bill is $ 2,801.00. I am a General Contractor and business has been real bad. I am hard put to agree to something that I don't know I can keep. Can they lien my personal property for such a small amount of money?
Your advise would be welcome.
Thank you!
Joe

Answer
Hi Joe:

This is a VERY complicated question FULL of variables.  Please be sure to get additional opinions and seek legal advice if needed.

The answer to your question is "yes, in some cases."  First, state laws play a part in this.  I cannot address this since I don't know which state you live in and I don't know the nuances of the laws for all 50 states.

One of the keys to separating your liability from the corporation is records and solvency.  How long have you been incorporated?  Have you kept up annual meetings?  Annual meeting notes?  Filed required corporate documents by the due date with the state?  Do you have licenses in the business name?  Insurance?  Do you keep separate records?  Separate banking account?  No co-mingling of funds?  Do you act within your score as an officer/director?  Are/were there enough separated funds to adequately fund a corporation?  See where I'm going with this?  The more your corporation ACTS as a corporation the better you are.  As soon as you start acting more as a boss or owner, your personal liability protection begins to weaken.

There are also other factors.  Did you personally guarantee the actual bill?  Sign for it in your name or as president?  Pay for part of it with a personal check?  Did they use a fed id number of social security number for a credit check?  If any of these things happened, it is likely YOUR debt, not just the company's.

Was it an illegal or unethical transaction?  Something like writing a bad check to try and pay for it?  Were some of the materials/labor of the bill used on your house?  Were there personal "loans" from you to the company?  Again, these situations make it likely a personal loan instead of a corporate loan.

The days of saying "I can't be sued because I'm incorporated, period, without exception" are over.  You really have to act and be able to show you are a corporation - no different than Microsoft, except the checking balance :)

That being said, the creditor would have to go to court to get a lien on your personal property.  You would have a chance to defend yourself including presenting evidence they are suing the wrong entity (you) not the corporation.  You can also try and settle at that point.  Would they take you to court for $2,800 on a 2006 bill?  I'm not so sure.  (NOTE:  If the bill was for materials or labor on YOUR house, that's different.  Mechanics liens are often easier and vary by state.)

Also, if this is a collection agency, you are protected by the FDCPA.  Collection agencies must adhere to certain guidelines among them is not using illegal or deceptive means to collect a debt, no harassment, no calls before 8am or after 9pm, no threats and similar action.  There are several more things they must comply with but it is too long to get into unless you feel it is an issue in your case.  I would be happy to provide more details if you think the collection agency is acting beyond its legal authority.  This is OFTEN critical in credit repair to eliminate debt or negotiate a settlement, so keep an eye on it.

Finally, check the statute of limitations in your state.  If it beyond that, you have an affirmative defense and no lien can be placed unless you get a default judgement by not showing up.

Hope this helps.  Good luck!

Regan
mbscompany@aim.com