Collection law is an interesting nook of the law most people know little if anything about. It governs how certain agencies recoup funds owed to them. How much do you know about collection law? Keep reading to learn about the legal definition of collection law and find examples of how a collections lawyer might do their job.
According to The Law Dictionary, the legal definition of “collections” is: “This is a process for recovering delinquency amounts owed to a firm by a customer.” The term can also be used elsewhere: “In Banking, this is the (1). presenting a check or draft as payment, then as a receipt of its amount in cash or as a credit to the account; (2). moving of delinquent or past due accounts for full or partial recovery of the amount to a collection agency or a special department set up for collections purpose.”
Less often, the term collections can be used to refer to foreign trade activities. It means the collection of a payment required of an importer or buyer, wherein the bank receives the requisite documentation required before delivery can occur. A collections lawyer needs to know each of these definitions.
Lawyers who work in this practice area need to be able to represent clients on both ends of collection: debtors and creditors. They need to know how to provide help for public and private lenders, asset-based lenders, commercial and real estate lenders, secured and unsecured creditors, investors, banks both at home and abroad, and various types of financial institutions. This is a nuanced field of law, and the collections lawyers need to know everything there is to know. It’s not an easy job.
Collections law is also very closely associated with bankruptcy law. Some lawyers specialize in one or the other, while others prefer to do both in order to attract a wider range of clients.
A lawyer who does both is expected to know how to win cases for creditors during bankruptcy and/or insolvency proceedings, through litigation in and out of court. The job also includes knowledge about restructuring businesses to reduce expenditures and other losses. Protecting the client’s rights is the most important aspect of the job.
Lawyers also need to explore additional options to solve a client’s legal woes. These might include the production of objections to confirmation, motions for relief, debt restructuring, the processing of executory contracts, negotiation of claim resolution, repossessing assets from defendants, processing eviction and foreclosure, valuing assets, discharge, and reaffirmations. When no one wants to solve the problem in court, lawyers will need to know how to defend a client during mediation or arbitration.
The law is normally stacked in favor of the debtor — that’s why bankruptcy exists in the first place. But creditors have rights as well. It’s the job of a collections lawyer to make sure those rights are heard and that the law is followed. If you believe you are being taken advantage of during bankruptcy proceedings, you might need a collections lawyer.