When a debtor becomes non-responsive, it can place a significant strain on a business’s cash flow, disrupting operations and impeding growth. For creditors, especially those concerned with business-to-business transactions, collecting overdue debts often begins with standard collection efforts, such as phone calls, emails and formal demand letters. However, when a debtor continuously ignores these attempts, pursuing litigation may be the most effective path to recover an outstanding balance.
Before initiating litigation, it’s important to evaluate the debt and ensure there’s a solid legal basis for the claim. This may involve gathering all relevant documents, such as contracts, invoices, payment records, correspondence and prior demand letters, before moving forward in any concrete way. These documents can establish the validity of the debt, proving the services or goods provided, the agreed-upon terms and the debtor’s failure to pay. Clear and organized evidence can strengthen collections litigation cases and may even prompt a debtor to settle before formal court proceedings begin.
Moving forward
When a debtor remains unresponsive despite formal demands, filing a lawsuit initiates a legal process to compel payment. If the debtor continues to be non-responsive, the creditor’s legal team can pursue a default judgment. A default judgment is granted when the defendant fails to respond or appear in court as required, allowing the court to rule in favor of the plaintiff without further proceedings. With a default judgment, the creditor has a legally enforceable claim against the debtor for the outstanding amount, including potentially awarded court costs and interest.
Enforcement can be a separate challenge, particularly if the debtor is still uncooperative. Thankfully, creditors have several tools to enforce a judgment, including wage garnishments, bank levies and property liens. In cases where the debtor has limited assets or income, enforcing a judgment can be complex. However, judgments often remain valid for years and can potentially be renewed, allowing creditors to pursue enforcement if a non-responsive debtor acquires assets in the future.
While litigation involves time and resources, it can provide a powerful opportunity for resolution on behalf of creditors dealing with non-responsive debtors.