Birmingham Creditors Rights Attorneys

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Alabama Creditors and Legal Issues They Should Know

Debt is a fact of life, and those to whom it’s owed often depend significantly on the revenue associated therewith. Whether associated with medical services or the credit card industry, the financial health of your enterprise requires that you may—and potentially with the help of a collections law firm—collect on debt that is legitimately owed thereto. As many companies well understand, doing business is not an act of charity. That said, proper collections practices require that creditors and law firms representing them follow the law. On account of common law, state law and federal statutes alike, this is no less true in Alabama.

Whilst creditors are responsible for adhering to certain requirements, they also are entitled to legal protection, as well. So long as they follow the rules, they are allowed to pursue collection of debt via a variety of means.

Indeed, a Supreme Court case recently found that an Alabama woman could not legitimately sue a collections agency in spite of the fact that it had pursued debt after a six year statute of limitations had expired (in this instance, found to be legitimately attainable on account of prior bankruptcy). Ordinarily, the Fair Debt Collection Practices Act prohibits actions that might reasonably be interpreted as “false, deceptive, or misleading representation” or makes collection attempts via “unfair or unconscionable means.” A federal appeals court notified the Alabama woman that she might pursue redress against the creditor, Midland Funding, on account of said statute. On a 5-3 decision, the Supreme Court disagreed and thereby reminded those on both sides of the issue that creditors are not unconditionally liable for potentially controversial attempts made on behalf of collection.

Nevertheless, it is obviously essential that such creditors remain on the right side of the law in order to avoid potentially costly reprisal and legal action.

Legal Issues Creditors Should Look For

If you’re a creditor looking to collect debts owed thereto, there are a few things to generally consider. First, is there a verifiably open account or contractual agreement by which one party owes the other a debt in the first place? Second, has too much time passed since the closure of an account or last activity associated therewith? Depending upon the status of the account or contract, the statute of limitations for collection is generally between three and six years, while contracts under seal enjoy a limit of 10 years. Finally, the creditor must soundly demonstrate via documentation and support that a debt is in fact owed, and it must do so according to a burden of proof accordant with a preponderance of evidence regarding the nature and extent of debt owed.

While there are certainly additional and more detailed factors to consider, legal advisement may be helpful to clarify your rights and responsibility regarding the possibility of collection.

Finding the Right Legal Help

Alabama law isn’t one-sided. It considers the rights and interests of creditors, as well. If you require help in the pursuit of a debt that is legitimately owed to you, Cloud, Willis & Ellis has the pedigree and professional prowess to handle your affairs correctly. Reach out to us today for help.

Resources:

al.com/news/index.ssf/2017/05/us_supreme_court_rules_against_1.html

alabamaatj.org/wp-content/uploads/2014/01/Collections-Litigation.pdf

U.S. Supreme Court Upholds Creditor Priority Scheme

On March 22^nd, the U.S. Supreme Court fortunately upheld the U.S. Bankruptcy Code’s priority rule governing the order in which classes of creditors are paid. The decision firmly embeds the Bankruptcy Code’s creditor priority scheme, preventing the courts from authorizing a distribution of Chapter 11 estate assets in violation of creditor hierarchy as part of a structured dismissal (without the consent of the affected creditors).

The case – Czyzewski v. Jevic Holding Corp.—is the latest development in a longstanding battle over whether the bankruptcy process can be used to implement a division of value that would effectively skip over intervening creditors over their objection. The court’s opinion effectively upheld a rule that has been in place for over 100 years by making it clear that priority deviations accomplished through non-consensual structured dismissals are not in compliance with the law.

The court did not go so far as to state that there could never be a deviation from the U.S. Bankruptcy Code’s absolute priority rule governing the order, i.e. it did not effectively eliminate any possibility of first-day motions, which allow a debtor to pay certain vendors before paying higher-priority creditors. Many attorneys serving creditors in the collections process were supportive of this decision by the court, as going that far arguably could have “wreaked havoc” in day-to-day bankruptcy practice.

Bankruptcy Cases & Structured Dismissals

Traditionally, a bankruptcy case can be resolved in one of three ways:

Chapter 11 plan of reorganization via bankruptcy judge;
Chapter 7 conversion to liquidate debtor’s assets; or
Dismissal of the bankruptcy case, which leaves creditors to seek recovery on their own.

However, there is some leeway when it comes to structured dismissals: they allow the court to approve distribution to some creditors by granting third-party releases or holding certain transactions in place during the Chapter 11 proceedings, even if it is technically providing a dismissal at the same time. In the original case, plaintiffs argued that it should be permissible to essentially “leapfrog” certain groups of creditors in this process under certain circumstances. Those circumstances, they argued, are present when there is no chance for unsecured creditors to recover anything under liquidation.

Decision

The Supreme Court disagreed, instead indicating that courts cannot deviate from the structure of the code and the established priority scheme when it comes to distributing proceeds to creditors. The opinion was narrowly tailored, however, so as to ensure that it did not apply to other areas of Chapter 11 bankruptcy (i.e. that it only applied to a structured dismissal).

Birmingham, Hoover, and Mobile, Alabama Creditors’ Rights Attorneys

Cloud Willis & Ellis has long been serving both local and national creditors in commercial collections and retail collections. Our Birmingham creditors’ rights attorneys will work hard to protect those rights for secured and unsecured creditors. Contact us today to find out how we can help you.

Resources:

law360.com/corporate/articles/905522/justices-avoid-upending-ch-11-creditor-payment-practices

scotusblog.com/2017/03/opinion-analysis-bankruptcy-priority-rules-may-not-evaded-chapter-11-structured-dismissals/

Alabama Collection Case Heard By U.S. Supreme Court Could Have Broad Implications

On January 17^th, the U.S. Supreme Court heard a case that could have national repercussions for debt collectors. Specifically, the issue at stake is whether debt collectors are abusing the bankruptcy process when they request bills to be paid, bills which are no longer collectible under state laws.

According to the Federal Trade Commission, the nine largest debt buyers are currently facing a value of more than $140 billion, where more than 10 percent of that debt is between six and 15 years old; therefore, this decision in this case will have a broad impact on U.S. collection companies.

The Case

The case heard by the Court originated with the bankruptcy of an Alabama resident who filed for chapter 13 bankruptcy almost three years ago, enabling any businesses who were owed money be paid over the course of three to five years by filing a claim. One of those was a company which filed a claim for credit card debt that was more than six years old.

The Law

Many state laws prohibit medical and credit card collection companies from collecting for debt after three to six years; for example, in Alabama, creditors cannot collect debts that are more than six years old.

However, these companies have traditionally still been able to file paperwork in association with a consumer bankruptcy case in order to collect debts that may technically be ‘expired’ at the state law level. This is because bankruptcy law does not explicitly ban creditors from collecting older debts; in fact, one might argue that bankruptcy law explicitly invites this type of debt collection.

A company requesting payment under bankruptcy law has been both a legal and fair means of collecting past due debts for many years. Collection companies are still technically in keeping with federal law as long as they are, at the federal level, in compliance with the Fair Debt Collection Practice Act, which establishes a system of consumer protection against abusive debt collection practices, promotes fair debt collection, and provides consumers with a means of disputing and obtaining validation of debt information in order to check its accuracy.

Now At Issue

One of the main issues that the Court will decide on is whether this particular debt-collection practice conflicts with the requirement that creditors file claims in good faith. The Court is expected to announce its decision by the end of June of this year.

Attorneys Committed To Protecting Collection Companies

Cloud Willis & Ellis has been serving local and national creditors in commercial, medical, and other collections for years. We work hard to protect those rights for creditors, who depend upon these payments. Contact us in Alabama today and find out how we can help your business efficiently recover delinquent debts.

Resources:

wsj.com/articles/supreme-court-hears-arguments-on-collection-of-expired-debts-1484693691

ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text

Mechanic’s Liens – The Contractor’s Remedy For Non-Payment

Many homeowners will at some point decide to make some renovations to their home. As such, they find a contractor through referrals from friends and colleagues, hire the contractor to perform the renovations, and get started on the project. In a perfect world, all goes smoothly and the renovations are performed to their specifications, to the homeowner’s satisfaction, and on time – so now it’s time to pay the bill. The contractor submits the bill and waits – patiently – as the due date passes. A second notice is subsequently ignored, and requests for payment go unanswered. The work has already been performed and material and labor has been provided – what options does the contractor have to pursue the money owed to him? In this scenario, the contractor has the option to file a mechanic’s lien and have it enforced under Alabama law.

Requirements To File A Mechanic’s Lien

In Alabama, the law states that two requirements must be met in order for a mechanic’s lien to be filed. First, the filing party – the contractor, in our hypothetical scenario – must have made some improvement to the property such as providing materials, labor, engineering services, or any other type of labor that added value to the property against which the lien is issued. The second requirement is that of a specific relationship between the parties; the filing party must be the original contractor or subcontractor or those who supplied materials to those contractors and subcontractors. As long as these two requirements are met, the one of two different types of mechanic’s liens can be filed under Alabama law – a full price lien or an unpaid balance lien. The full price lien is filed when the filing party has a contract with the property owner, and the unpaid balance lien can be filed by a worker who does not have a contractual relationship on his own with the owner of the property.

The Basic Steps

Once the basics are established, the procedure to file a mechanic’s lien involves providing written notice of intent to file the lien, filing a verified lien statement, and filing suit and obtaining a judgment. Taking these in order, the notice requirement entails sending information to the property owner about the amount in question, the work that was performed, and the person or organization that is owed the money. The notice must also include information about the right to attorney’s fees and finance charges that can be assessed. The second step – filing the verified lien statement – must be done either within 30 days from the last work day in the case of individual laborers or within six months in the case of contractors; other filing parties would need to file within four months of the last work day. The statement must be filed in the county where the property is located. The last step, filing the lawsuit, must be done within six months of the final work day on the property.

Do You Need Help Getting Paid For Your Construction Project?

If you have performed contract work for a property owner and are having trouble getting paid for your time and materials, the attorneys at Cloud Willis & Ellis can help you determine whether a mechanic’s lien is the best way to get the money owed to you. Our legal professionals have successfully assisted clients throughout the Birmingham area recover money owed for their work and will work hard to get the same results for you. Contact Cloud Willis & Ellis now and get the results you deserve.

Resource:

alisondb.legislature.state.al.us/alison/codeofalabama/1975/35-11-210.htm

Credit Applications: A Very Helpful Tool For B2B Debt Collection

Before your business extends credit to a new customer it is important to determine whether or not they are creditworthy. Many businesses make this determination via a credit application. However, the information that a potential customer provides on their credit application can be useful to your business in a number of different ways. Yes the information can help you determine whether it is a good idea to extend credit in the first place, but it can also serve as a very helpful tool for collecting outstanding debt. Collecting accounts receivable for business-to-business transactions (B2B) can be a complicated task, however, a well drafted credit application can make the process a whole lot less painful.

Credit Applications

A ‘credit application’ is a formal request for credit. This generally consists of a written form outlining important terms of the transaction such as the amount and type of credit, the debtor’s Personally Identifiable Information (PII), how the loan will be secured, and other various terms and conditions of the agreement. While this is the information that is generally included on credit applications, it is important to keep in mind that a properly drafted application form should be tailored to suit the specific needs of your business. Therefore, it is a good idea to consult with an experienced creditors’ rights attorney to ensure that your credit application form is appropriate and will give your business the best possible chance of collecting all debts that it is owed.

How Can A Customer’s Credit Application Help My Business Recover Unpaid Debt?

A B2B collections article from the International Association of Commercial Collectors, Inc. (IACC) points out that a customer’s credit application can be very helpful to your business when collecting accounts receivable. The IACC notes that properly drafted credit applications likely contain useful information that can help you ascertain both the parameters of the debt obligation at issue as well as detailed information that can help you track down the debtor if they try to skip out on their debt obligation.

For example, a customer’s credit application can help you track down a debtor or a bank account that has vanished. Even with business-to-business debt it can be complicated to find the person who is legally obligated to repay a particular debt. Therefore, a credit application that contains plenty of Personally Identifiable Information (PII) can be very helpful when searching for an obligated party. For instance, if the credit application contains the responsible party’s driver’s license number then you will likely be able to obtain their home address. In most instances, the Drivers Privacy Protection Act (18 U.S.C. § 2721 et. seq.) allows you to obtain information about a debtor’s license and registration, including their home address, from your state’s Department of Motor Vehicles once you initiate litigation against them. Additionally, if you want to recover payment from a debtor’s bank account you must know the debtor’s bank account information. This information should be included on the customer’s credit application form, however, before issuing credit you may want to consider contacting your customer’s bank in order to verify that the bank information provided is correct.

How Can We Help?

Your business’ credit application form plays a critical role both when determining whether a new customer is creditworthy and again when attempting to recover outstanding debt if the customer defaults. The experienced creditors’ rights attorneys at Cloud Willis & Ellis, LLC are happy to help draft a credit application that is tailored to meet your business’ unique requirements. Call our Birmingham office at (205) 322-6060 or our Mobile office at (251) 545-4844 today.

What Is A Mechanic’s Lien?

A mechanic’s lien (also referred to as a materialman’s lien or a construction lien) is a legal tool that is designed to help those who supply labor or materials for a construction project to collect money that is owed to them for work that they have completed but have unjustifiably been denied payment for. If you own a construction business, you may lose sleep at night worrying about not being about to collect payment for your services; therefore, it is a good idea to know a little bit about how a mechanic’s lien works just in case you ever need one. This article briefly outlines Alabama’s laws regarding who can claim a mechanic’s lien, how to file a lien, and how long your lien is valid.

Who Can Claim A Mechanic’s Lien In Alabama?

Under Alabama code section 35-11-210, a mechanic’s lien can be filed by a mechanic, person, firm, or corporation who acts on a qualifying contract with the owner (or his agent, architect, trustee, contractor, or subcontractor) of land and improves a building or improvement of land by:

Performing any work or labor,
Furnishing any material, fixture, engine, boiler, waste disposal service and equipment, or
Repairing, altering, or beautifying the land

Note that in Alabama even subcontractors may be able to obtain a mechanic’s lien against the property that they have been working on. But how do you actually file a mechanic’s lien?

How To File A Mechanic’s Lien In Alabama

In order to obtain a mechanic’s lien you must first go to the office of the probate judge for the county in which the property is located and file a verified statement of the lien. A ‘verified statement of the lien’ is a statement given in writing that states the amount of the demand secured by the lien and a description of the property on which the lien is claimed (generally providing the house’s address is sufficient). The person claiming the lien, or some other person who knows the facts surrounding the desired lien, must provide this statement under oath.

It is important to note that Alabama requires verified lien statements to be filed within a certain time period. Original contractors must file within six months after completing the last item of work or labor, or providing the last material. On the other hand, journeymen and day laborers have 30 days, and all other parties have four months.

How Long Is A Mechanic’s Lien Valid In Alabama?

Generally, Alabama code section 35-11-221 requires lien holders to bring an action to enforce their mechanic’s lien within six months “after the maturity of the entire indebtedness secured thereby…” In some instances this time period may be tricky to determine, but a competent creditor’s rights attorney can help determine when your lien will expire.

How Can We Help?

If you are interested in obtaining or enforcing a mechanic’s lien in Alabama it is a good idea to consult with a competent attorney. The experienced creditor’s rights lawyers at Cloud Willis & Ellis, LLC have offices in Birmingham (205-322-6060) and Mobile (251-545-4844) and are happy to assist you.

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