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Commercial Debt Collection Defense for Southern California Businesses

Supporting local business owners against aggressive debt collection

Starting a business is difficult, expensive work. Most businesses incur a mountain of commercial debt early on to acquire inventory, purchase or lease real estate, hire staff, conduct improvements, and otherwise fund business expenses. Businesses struggling under commercial debt have many options available to them, including debt settlement, debt consolidation, and several types of bankruptcy. Commercial debt collection agencies are no less aggressive with small businesses than they are with individuals, and responding to their efforts requires careful consideration and a measured approach.

Whether you are dealing with commercial debt collectors, considering your options for debt relief, or deciding whether and how to conduct a small business bankruptcy, the commercial debt defense attorneys at Rounds & Sutter provide the advice and assistance necessary to protect your business, your finances, and your future.

Who Owns the Debt?

The first question that needs to be asked regarding any business debt is: Who owns the debt? Many small business owners intermingle personal and business finances, especially if they are sole proprietors. If the business owns the debt, then only the business can be liable, and only business assets can be seized or attached. If you, as an individual, obtained the credit, personally guaranteed the payment, or are otherwise named as an individual on the instrument, then you could be personally liable for the debt. Additionally, sole proprietors and partners in partnerships can be held personally liable for business debt. Personal liability might attach even if the debt was incurred for solely business purposes.

If you run a corporation or limited liability company and the debt was properly maintained within the business, then only the business can be liable (so long as the debt was not personally guaranteed). Any collection effort aimed at you or your partners individually, or other businesses unattached to the debtor entity, is improper and must be stopped. A seasoned commercial debt defense attorney can comb through your finances and help you identify where you are and are not personally on the hook for any business debt.

Separating Personal from Business Debt

Not every asset acquired through the company counts as business debt. Business debts are just that: debts acquired by the business for business purposes. Typical business debts include things like credit for obtaining inventory or tools to conduct the business, or for purchasing business real estate.

It is important to keep business and personal expenses separate in order to avoid individual liability. Using the company credit card to purchase a family vacation, for example, is a personal debt. Some other purchases may be harder to quantify. Buying a car in the company’s name primarily for business use, but the use of which overlaps with personal use, might crossover between business and personal. Discuss your expenses and your debt with your debt defense attorney to ensure you know where your personal and business liabilities lie.

Standards for Commercial Debt Collection

Debt collectors must abide by certain restrictions under the law. While individual consumers are protected by the Fair Debt Collection Practices Act (FDCPA), business debtors are not. Other rules and regulations may come into play, however.

Commercial debt collection agencies are subject to oversight by the Commercial Collection Agency Association (CCAA), which maintains stringent ethical standards and membership requirements. Additionally, California collection agencies are soon to be subject to the requirements of the Debt Collection Licensing Act (DCLA). The DCLA will require debt collectors operating in California to obtain and maintain a license and adhere to certain standards. The law specifically applies to consumer debt collectors, but agencies who collect both consumer and commercial debt will, ostensibly, need to adhere to the statute’s rules.

The lack of specific laws pertaining to collection efforts by commercial debt collectors serves as a reminder of the importance of identifying business vs. personal debts. Your commercial debt collection defense lawyer can help you classify your debt and keep your personal liability to a minimum while exploring your options for debt relief and debt defense.

Dedicated Business Debt Relief Attorneys Finding the Right Solutions

At Rounds & Sutter, we work with individuals and California small businesses every day, guiding them through real estate deals and other business law transactions, and we help protect their interests against crippling commercial debt. We understand the daily struggles and long-term challenges small businesses face, and we can help you create a solution that best meets your needs. If you are having difficulty meeting your company’s financial obligations, contact Rounds & Sutter to defend against commercial debt collection efforts and explore the solutions available to you.