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New York Construction Law Blog

Should your construction firm sell its uncollected debts?

Posted by Karl Silverberg | Aug 27, 2020 | 0 Comments

When you supply materials or perform labor for a homeowner who's remodeling their property or someone that's building a new house, you expect to be paid in full for the value of the goods or services you provided. Unfortunately, both individual homeowners and companies providing construction and remodeling services can sometimes shirk their obligation to pay suppliers and subcontractors. 

One of the ways to compel people to pay involves getting a mechanic's lien on a property. That may not be an option if the person who fails to pay you isn't a homeowner. Debt collection efforts may be the logical next step for those with unpaid invoices. Should you try to handle it yourself, or is hiring a collection company in your best interests?

There are pros and cons to outsourcing debt collection

Generally speaking, if your company works with a professional debt collection agency, that company is not going to collect on your behalf. They will buy your debt for a fraction of the amount it represents and then aggressively pursue collections against the party that owes you money. They will keep what they collect. 

In a situation where you can't secure a lien and you have very little opportunity to communicate with the party that owes you money, selling the debt can at least let you recover some of your losses. However, there are far more limitations on the activities of collection agencies than there are out of business collecting directly on its own debt 

On the other hand, attempting to collect on your own debt could damage your reputation or leave you vulnerable if an employee violates the law in their attempt to collect the debt. Your company needs to carefully consider its options when someone refuses to pay on an invoice. Getting the right help with the decision-making process can be as important as getting help with the debt collection process itself.

About the Author

Karl Silverberg

Karl Silverberg Contact Me: (631) 778-6077 Email me Practice Areas: Construction Law Biography Prior to law school, Mr. Silverberg worked as a professional engineer, and has eight years of experience working as a structural engineer on public sector transportation projects. Mr. Silver...


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