Category: Business Law Blog

Difficult Debtors: Tips from the Front Line

Bad debts are a source of irritation, and sometimes ruin, for all companies.  According to a July 15, 2008 article by Melanie Lindner on Forbes.Com, a business can expect to collect nine out of ten dollars of a debt within the first 90 days of the due date- after that the numbers begin to plummet.  While most debtors are simply good people who have fallen on hard times, there are exceptions.  We all know the ‘professional debtor’; that person who has so much debt he or she has ceased to care.  The professional debtor has collectors knocking down his or her door while continuing to buy new clothes, go on exotic vacations and live it up.  The professional debtor is one of the most difficult debtors to deal with as he or she has a litany of excuses and tactics to turn the situation into something that’s your fault.  At Epiphany Law we’ve dealt with all kinds of debtors, either through experiences with our own various business ventures or by helping our clients get the money they’re entitled to.  We’ve heard all the excuses in the book, from the mundane to the downright outrageous.  We’ve compiled a list of tips that you can use everyday in your own business.  By using what we’ve learned, you can make dealing with difficult debtors less stressful and increase your chances of getting paid.

Be Prepared

The professional debtor is always prepared.  He or she will have a list of excuses as to why you can’t be paid right now or why you didn’t receive the payment that he or she sent last week.  The professional debtor might even go into a story detailing the many blows he or she has been dealt by life.  If you’re unprepared for these excuses, you’ll easily be blown off.  Write a list of the most common excuses that you hear and then match each one up with an effective rebuttal.  If a debtor says that he or she mailed the check, ask for the check number and the date of mailing.  If he or she says your invoice has been lost, say you’ll fax a copy over immediately and ask when you can expect the payment to be mailed.  Be sure to have all the information you’ll need ready so you can answer any questions.  Have the exact amount that’s owed, any terms or conditions of the sale, what was provided or purchased and anything else pertinent to your transaction at your fingertips.

Be Professional

Having a professional demeanor demands respect.  Treat the conversation as if it were a job interview.  Speak a bit more slowly and enunciate so you can be easily and clearly understood.  Remember that this is business, not personal.  Never raise your voice, swear, or threaten the debtor.  The professional debtor may try to fluster you or make you get angry; he or she may yell, swear, and threaten you.  Don’t retaliate.  If the debtor yells or becomes excessively belligerent, ask when a better time to call him or her would be or put the debtor on hold for a few seconds.  This gives the debtor time to calm down and, hopefully, respond to you in a more appropriate manner.

Take Control of the Situation

Don’t make the debtor go on the defensive- that won’t get you anywhere.  Using language centered around you, such as “I understand that you’re frustrated” or “I see how upsetting that would be,” instead of language centered around the debtor, like “You’re getting too upset over this” will help keep the debtor from getting defensive.  Stay focused on the task at hand.  If the debtor tries to get you off topic, be polite but always bring him or her back to the focus of the conversation- getting paid for the goods or services you provided.  Take notes every time you contact the debtor.  Keep track of what date and time you called him or her, the key points of what was said, and any promises that were made by the debtor.  This will come in handy if you have to contact the debtor again.

Get a Commitment

Do not end the conversation without summarizing the results.  Reiterate what he or she has committed to (payment amount, payment plan, etc.), your expectations (receiving payment by X date), and the consequences if the debtor does not follow through (turning the matter over to an attorney, etc.).  Depending on your relationship with the debtor, it may be a good idea to follow up with a letter recapping the conversation.  If the debtor still fails to follow through on his or her commitment to pay you, you must make sure to put your consequences into action.  If you constantly issue empty threats, the debtor will never take you seriously.

As with any situation, use your best judgment when deciding how to handle a debtor, and consult an attorney if needed.  However, don’t allow yourself to feel there is a stigma associated with collecting money that is rightfully owed to you.  The bottom line is that you have a contract, the goods or services were delivered and you have a right to expect payment.  If you have questions about collections for your business, call us at (920) 996-0000.

Navigating the New Law of the Land: How Concealed Carry Affects Your Business

On July 8, 2011, Governor Scott Walker signed Senate Bill 93 (“Concealed Carry Bill”) into law, meaning the law will likely go into effect on November 1, 2011.  Though it may not seem like it, this new law will affect every business in Wisconsin, from bars to doctor’s offices and everything in between.  Now is the time to re-examine the policies in place at your business as choosing whether to prohibit weapons may impact your liability.

Anatomy of the Concealed Carry Bill

Under the Concealed Carry Bill, a weapon is defined as “A handgun, an electric weapon […], a knife other than a switchblade knife […] or a billy club.”   Anyone who wants to carry a concealed weapon may apply for a license, which is good for a period of five (5) years, as long as he or she meets the following criteria: 1) At least 21 years old, 2) Not prohibited under State or Federal law from possessing firearms, 3) Not prohibited by a court from possessing firearms, 4) Is a resident of the State of Wisconsin, and 5) Has provided proof of adequate training.   Anyone carrying a concealed weapon on property that is not owned, leased or otherwise legally occupied by that person must have a valid license and photo identification on his or her person.

The Concealed Carry Bill specifically prohibits weapons, concealed or not, in the following places:  1) A police station, sheriff’s office, state patrol station, or the office of a criminal investigation special agent, 2) A prison, jail, or other correctional facility, 3) A mental health facility, 4) A county, state or federal courthouse, 5) A municipal courtroom if court is in session, and 6) Beyond the security checkpoint in an airport.  Violators are subject to a fine of up to Five Hundred Dollars ($500.00), imprisonment for up to thirty (30) days or both.

The Effect of the Concealed Carry Bill on Liability

Business owners must now decide whether to allow concealed weapons on their property.  As a business owner, if you decide to allow concealed weapons on your property, you are immune from any liability stemming from that decision.   Therefore, if a customer or employee is carrying a handgun that accidently discharges, causing an injury, you cannot be held liable simply because you allowed concealed weapons on your property.

However, if you want to prohibit weapons, there are a number of factors to take into consideration.  The first factor is that by prohibiting concealed weapons, you, as the business owner, lose your immunity.  That’s right- if you choose not to allow weapons on your property, you could be held liable for an action occurring on your property.

The second consideration is that an establishment that prohibits weapons must effectively put customers and employees on notice by posting signs on the premises or in the building.  The sign should 1) Be at least 5” x 7”, 2) State that weapons are prohibited on the premises or in the building, 3) Identify the portion of the building or premises on which weapons are prohibited (if applicable), 4) Include the name of the individual giving the notice and 5) Include the word “owner” or “occupant” after the name of the individual giving notice.  This sign must be prominently posted near all entrances and/or access points to the restricted building or premises.

Another factor to consider is your employees.  If you decide to prohibit weapons in your building or on your property, we strongly recommend changing your policies and employee handbook to reflect that prohibition.  Any change in policy should state which specific weapons are prohibited, where weapons are prohibited and the consequences of violating the policy.  However, you cannot, as a condition of employment, prohibit an employee from carrying or storing a concealed weapon or ammunition in his or her car, even if the car is used for work.

The final aspect to take into account is consistency.  If you want to prohibit weapons on your property or in your building, you cannot disregard employee violations of the prohibition.  A violation must result in the same disciplinary action across the board, each and every time.  Since employers prohibiting concealed weapons have no immunity to liability, being consistent will lessen the likelihood that an employee will disobey the policy and reduce potential liability.

Making the Decision

No matter how you feel about the Concealed Carry Bill, it will have impact your business.  Whichever way you decide to go, now is the perfect time to revisit your employment policies and make sure you have measures in place to protect your business, customers and employees.  For more information on the Concealed Carry Bill or your employment policies, contact our office at (920) 996-0000

Giving Property to Children or Adding Them to Title

An extremely common mistake people make with regard to estate planning is the assumption that you can avoid estate taxes and probate simply by retitling your property in the name of your children or loved ones – i.e., giving it away.  Or, if you don’t want to give the property away, the idea of adding children as joint tenants or even adding them as joint bank account holders seems like it could solve the problem.

Don’t give your property away during your lifetime

Let’s clear this up.  It’s inevitable that at some point your property will not be yours any longer.  That is the nature of things.  But if you are reading about estate planning, chances are that you care about what happens to your property when you pass away.  And if you care about what happens to your property, you care that it benefits the people you want it to go to.

If you give your property away while you are alive, there are a number of risks that could strike.  First, there is the issue of taxes.  If you have held a piece of property for a number of years, it is likely that the property has appreciated in value.  If you die, your heirs won’t be taxed on how much your home has increased in value.  But, if you transfer your house to someone else other than your spouse during your life, when they sell the house they will be taxed on the difference between how much you paid and the fair market value at the time of the sale.

For example, imagine that you purchased a home 30 years ago for $30,000.  The house is now worth $330,000.  If you transferred title to your children during life and then your children sold the house, they would pay taxes on $300,000 worth of gain – or $60,000 when the capital gains rates are 20%.  If you transfer the house at death, the basis would “step up” to $330,000, so the gain and the tax would be zero.

Another obvious problem is that when you change title to your property, it is no longer yours.  If your children have money troubles, divorce or enter bankruptcy, their creditors could take the property.  The same problem exists if your children are joint tenants.

Don’t add children to your property deeds or bank accounts

The other common estate planning “solution” is to add children to bank accounts or as joint tenants (where property passes automatically upon death).  Although there are circumstances where this could be appropriate, those situations are rare.  You should consult with an estate planning attorney before retitling any of your property.

One problem with joint tenancy is that you have effectively given a share of the property away.  So bankruptcy, divorce and other creditor issues could arise even if your child is a joint tenant and not 100% owner.  If the child doesn’t have money to pay the creditors, it is possible that the creditors could have the house sold off to pay their debts.  You would get your half of the proceeds, but lose the house.

Joint bank accounts are another problem area, especially in families with multiple siblings.  In some families, a parent chooses one sibling as joint bank account holder.  This sibling then has the “expectation” to distribute the bank account evenly to the others when the parent passes away.

I wouldn’t want to be that sibling!  Not only is there potential income taxation on the entire bank account, there might be gift taxes on the transfer as well.  That is, of course, assuming that the sibling doesn’t just decide to keep the bank account for him or herself.  It happens.

The moral today is that you should not transfer title or add children to joint bank accounts for the purposes of estate planning without the advice from an experienced estate planning attorney.  While these transfers and changes might seem like a good idea at first glance, there are simply too many risks behind the scenes.