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  1. #1
    EastCoast_NC is offline Junior Member
    Join Date
    Jan 2006
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    NC vs. MA - Trying to Collect A Bad Debt W/ Written & Verbal Contracts

    My apologies - I think I posted this in the wrong section before. I have added more defined details with this post.

    +++++++++++++++++++++++++++++++++++++++++++++++++++++

    Location: We are in North Carolina. Our client is in Massachusetts.

    I would welcome any solid advice regarding this problem we are having with a client.

    My husband and I own a graphic design/web development/hosting company in NC. We have been doing business successfully for a decade, with clients worldwide. We are incorporated.

    We have a bad-debt client who has been giving us the runaround over her unpaid account. She was co-owner of a realtor company in MA. They hired us in 2003 to design their website and provide hosting, which we did. The company did pay on their site development and hosting until the company dissolved in 2004. They have an account balance of over $600. We do have a written authorization/contract with her company for the services rendered. They were invoiced appropriately. There is no question they owe us this money. Unfortunately, since the company dissolved, we have no contacts for the other owner. But she has asssumed full responsibility for the account verbally, and asked for the invoices to be sent to her home address, which was documented in our client database.

    She's spent a great deal of effort to delay payment with claims of potential bankruptcy and other financial woes. Through phone calls, she made promise after promise that "some money was in the mail.. " We opted to believe her story and to work with her so that we would receive at least something on her balance. We allowed our Accounts Manager to accept a reduced payment of $300, and we would write off the rest to bad debt and be done with it. This agreement was made verbally between our Accounts Manager and her. The contract was verbally reiterated every time the Accounts Manager called to follow up with her. She did not pay the $300 in a timely manner (we even offered a payment plan). We were operating in good faith, for we give our clients every possible chance to make good on their debts and to work with them if they are struggling.

    (Note: The reason our communication was verbal was because she would not answer USPO mail (even returned receipt), nor would she give us a personal email address. The only email we have for her is the one with her dissolved company's domain. Speaking with her via the phone was the only way we could reach her successfully.)

    Having still not received a dime, she asked if we would forgive her debt completely if she referred another client with a large potential job to us. We gave our Accounts Manager the ok to proceed, with the clear stipulation that the referral must sign on for services and have paid in order for her account to be wiped clean. This agreement was also verbal. The referral did not pan out. In fact, the referral ended up being as frustrating to deal with as the client.

    Our Account Manager contacted her today with another attempt to collect. She refused to discuss matters, and hung up.

    We will no longer accept any additional referrals. We have tried to work with her for a grossly extended period of time to remedy this situation, to no avail. No, we are not stupid. But we are done trying to work this situation out with no results.

    I have looked into hiring a collections agency but they only seem to take a minimum number of cases, and we only have this one outstanding bad debtor. Because she is in another state, my assumption that small claims is our only legal recourse.

    Q1: Small claims court seems neither practical nor cost efficient, as don't we need to file and present our case in MA?
    Q2: Do the verbal agreements legally change how much we are due at this time? Are we due the written contract of $600 or the verbal contract of $300?
    Q3: Because the referall did not sign on for services, then is our offer to forgive the client's debt a non-issue?

    Yes, of course we could write the whole thing off and move on, as it's not a great deal of money owed and time is money trying to pursue this client. Giving up is something that we have considered and are prepared to do, but do not prefer if there is a logical way to get paid for our services.

    Thank you.
  2. #2
    seniorjudge is offline Senior Member
    Join Date
    Aug 2005
    Location
    St. Odo of Cluny Parish
    Posts
    29,533
    Quote Originally Posted by EastCoast_NC
    My apologies - I think I posted this in the wrong section before. I have added more defined details with this post.

    +++++++++++++++++++++++++++++++++++++++++++++++++++++

    Location: We are in North Carolina. Our client is in Massachusetts.

    I would welcome any solid advice regarding this problem we are having with a client.

    My husband and I own a graphic design/web development/hosting company in NC. We have been doing business successfully for a decade, with clients worldwide. We are incorporated.

    We have a bad-debt client who has been giving us the runaround over her unpaid account. She was co-owner of a realtor company in MA. They hired us in 2003 to design their website and provide hosting, which we did. The company did pay on their site development and hosting until the company dissolved in 2004. They have an account balance of over $600. We do have a written authorization/contract with her company for the services rendered. They were invoiced appropriately. There is no question they owe us this money. Unfortunately, since the company dissolved, we have no contacts for the other owner. But she has asssumed full responsibility for the account verbally, and asked for the invoices to be sent to her home address, which was documented in our client database.

    She's spent a great deal of effort to delay payment with claims of potential bankruptcy and other financial woes. Through phone calls, she made promise after promise that "some money was in the mail.. " We opted to believe her story and to work with her so that we would receive at least something on her balance. We allowed our Accounts Manager to accept a reduced payment of $300, and we would write off the rest to bad debt and be done with it. This agreement was made verbally between our Accounts Manager and her. The contract was verbally reiterated every time the Accounts Manager called to follow up with her. She did not pay the $300 in a timely manner (we even offered a payment plan). We were operating in good faith, for we give our clients every possible chance to make good on their debts and to work with them if they are struggling.

    (Note: The reason our communication was verbal was because she would not answer USPO mail (even returned receipt), nor would she give us a personal email address. The only email we have for her is the one with her dissolved company's domain. Speaking with her via the phone was the only way we could reach her successfully.)

    Having still not received a dime, she asked if we would forgive her debt completely if she referred another client with a large potential job to us. We gave our Accounts Manager the ok to proceed, with the clear stipulation that the referral must sign on for services and have paid in order for her account to be wiped clean. This agreement was also verbal. The referral did not pan out. In fact, the referral ended up being as frustrating to deal with as the client.

    Our Account Manager contacted her today with another attempt to collect. She refused to discuss matters, and hung up.

    We will no longer accept any additional referrals. We have tried to work with her for a grossly extended period of time to remedy this situation, to no avail. No, we are not stupid. But we are done trying to work this situation out with no results.

    I have looked into hiring a collections agency but they only seem to take a minimum number of cases, and we only have this one outstanding bad debtor. Because she is in another state, my assumption that small claims is our only legal recourse.

    Q1: Small claims court seems neither practical nor cost efficient, as don't we need to file and present our case in MA?
    Q2: Do the verbal agreements legally change how much we are due at this time? Are we due the written contract of $600 or the verbal contract of $300?
    Q3: Because the referall did not sign on for services, then is our offer to forgive the client's debt a non-issue?

    Yes, of course we could write the whole thing off and move on, as it's not a great deal of money owed and time is money trying to pursue this client. Giving up is something that we have considered and are prepared to do, but do not prefer if there is a logical way to get paid for our services.

    Thank you.

    Sell this to a collection agency.
    There are two rules for success:

    (1) Never tell everything you know.
  3. #3
    EastCoast_NC is offline Junior Member
    Join Date
    Jan 2006
    Posts
    15
    Before sending this account to a collection agency, what are the legal steps we have to abide by in notifying the client of our intent? For example, do we attempt x number of phone calls or USPO mail letters before we move forward?

    Can we send the full $600 to collections, given our $300 verbal agreement (albeit she didn't pay a cent toward it)?

    Lastly, does anyone have knowledge of an agency that will take only 1 case?

    Thank you.

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