LionSlayer

LionSlayer 2008-08-27T23:27:57Z http://blog.johnmgmurphylaw.com/atom.aspx Quick Blog Securing Payment - How can we believe them this time? tag:blog.johnmgmurphylaw.com,2008-03-17:ff805dde-73a6-48f5-b003-153b19fc32ad John Murphy 2008-03-17T19:59:35Z 2008-03-17T19:57:00Z
“Fool me once, shame on you. Fool me twice, shame on me.” This old chestnut holds a lot of meaning for the business person that has agreed to resolve an already defaulted account.

The business has already been fooled once - perhaps by a customer that would not, or truly could not, keep its payment promises. Often, such situations are resolved, before and after filing suit, with a second set of promises - a modification of the customer’s original payment obligations. The challenge in such a situation is how to make sure the promises are kept the second time - how to keep the business person from being “fooled again.”

Several options are available to “secure” the payment of the debt. The first is actual, traditional security - the pledging of some asset to the promisee through an indemnity deed of trust, security agreement or similar device. In many circumstances, however, the defaulting customer either doesn’t have any asset to pledge, or is unwilling to pledge that which he has.

The next level for facilitating payment is the use of a consent judgment, generally with an agreement not to execute if certain conditions are met. The benefit of this device is that if the customer fails to keep the promises that are the condition not to execute, the creditor can begin court-backed collection efforts immediately. Also, a consent to judgment entered in a circuit court of the state of Maryland operates as a lien on any real property owned by the debtor in the county of entry, which can be a significant benefit.

Both a deed of trust or similar security device, and a judgment lien by operation of law, will usually give the creditor a better position if the customer files bankruptcy - a not-uncommon occurrence in this arena. Provided that the lien has been in existence a sufficient amount of time prior to a bankruptcy filing, among other things, the creditor may be treated as a secured creditor and given an enhanced position in the bankruptcy action.

The lowest level of protection is the use of a promissory note, with or without a confession of judgment provision. A promissory note is just another set of promises to pay, and may not be any more collectible than the original debt. The note may contain a confession of judgment provision, which simply allows the creditor to have a judgment entered immediately upon default. A confessed judgment may be reopened on a relatively liberal basis; thus, confession of judgment is only marginally better than a mere promissory note. Nevertheless, obtaining even a bare promissory note from a customer may be quite valuable in itself, particularly when there is a concern that the original obligation suffered from some defect, perhaps concerning the value of the services or materials, a defect therein, or perhaps even the statue of limitations. Substituting a new set of promises for the old makes a great deal of sense in those situations.

In any event, the choice of a collection facilitation device requires a fair degree of thought and analysis of the circumstances, not to mention focused negotiation. This firm has extensive experience in assisting clients in maximizing their return on defaulted commercial promises, and stands ready to do the same for you.

]]> Good Tips for Bad Accounts tag:blog.johnmgmurphylaw.com,2007-04-10:3304c9e0-c91d-4bdd-a7b2-b0f662b878f2 John Murphy 2007-04-10T19:08:11Z 2007-04-10T19:00:00Z     No business person likes slow accounts. But they are a fact of business life. Even the most fortunate businesses at some point will face a customer’s default, which can range from a minor irritation to a catastrophic event. Like other business problems, however, most customer defaults can be best handled with a bit of forethought and preparation.

    Like other business problems, however, most customer defaults can be best handled with a bit of forethought and preparation.

   In the early stages, communication is key. Don’t just sit and watch an account age, and hope for the best. The longer the customer gets by with no contact concerning a past due account, the more acceptable it seems to the customer. A few well timed, friendly calls can go a long way toward resolving many A/R problems.

   But there are those cases that cannot be resolved by the creditor itself, either because of serious financial distress on the part of the customer, a perceived problem with the good or service delivered, or occasionally, interpersonal conflicts. In such cases, early legal intervention can be quite helpful and cost-efficient. An experienced commercial litigator can often resolve these more serious collection problems through correspondence (sometimes called “demand letters”) and related pre-filing negotiations. Particularly if the attorney has been retained on the proper basis, the business may be able to reach its goals with a minimum diversion of time and money.

   Sometimes, despite all efforts, litigation is required to convince a debtor to pay. In many cases, trial can be avoided through the use of a litigation device known as “summary judgment,” or in the Maryland district courts, affidavit judgment. Trials can be tried to a court or to a jury if either side elects; some creditors with foresight benefit from contractual waivers of the customer’s right to a jury trial. Other creditors obtain the customer’s agreement to arbitrate all issues except the creditor’s right to payment – which may eliminate the debtor’s raising of meritless counterclaims as a method of defense.

   In the toughest of cases, the customer will not, or cannot, pay even after judgment is entered. In such situations, the creditor has a right to examine the debtor in court as to the location and nature of the debtors’ assets, and in certain courts, the right to obtain additional information through court-approved discovery devices. The creditor also has the power to seize the debtors assets with the assistance of the court, and to reach assets and credits belonging to the debtor in the hands of third parties. And then, there is the specter of bankruptcy – a subject that will be reserved for future discussion.

   Whatever the nature of a defaulted account, early attention is the key to good results.
]]> Some Thoughts on Contingent Fees in Commercial Account Cases tag:blog.johnmgmurphylaw.com,2007-03-10:59ffb367-0990-4559-9710-3562929d9e8b John Murphy 2007-03-10T20:33:09Z 2007-03-10T20:27:00Z Perhaps the most common fee agreement for traditional collection work has been the contingent fee – the so-called “no recovery, no fee” arrangement. But today, more and more business people, particularly those in small to mid-size enterprises, are asking themselves if a contingent fee continues to make sense. The reasoned answer seems to be “no” - especially for a business with even a modest degree of knowledge of its accounts.

   Contingent fees were not designed as a risk-shifting device, as they are generally considered today. Rather, this arrangement was originally designed to make the law accessible to victims that were truly without the financial ability to enforce their right. As a risk-shifting tool, the device generally fails.

   Why is this so? Basically, because as compared to the hourly fee model, the creditor usually only benefits with respect to those accounts that are virtually uncollectible, and then only by eliminating further expense – not by maximizing the recovery.

   Consider the case of a generally solvent debtor that has not paid for any one of a number of reasons – non-fatal cash flow slowness, an internal shift in payment priorities, or perhaps a minor dispute over the goods or services. In such a case, a recovery likely will be had, and often by way of an early settlement. Let’s say after the expenditure of $1,000 in attorney time, the case is settled for $30,000. An attorney that accepted the case on a contingent fee basis receives a windfall -- a fee of $10,000 for one tenth the work. Conversely, the client’s net recovery is only $20,000 – only two thirds of a number that itself is likely far less than the original debt.

   On the other hand, the attorney that accepted the case on an hourly basis gets receives exactly that for which he bargained -- $1,000 for $1,000 of work. The client’s recovery is more realistic, as well. His net recovery is $29,000 – almost 50% more than under the contingent fee arrangement!

   Under a careful analysis, it can be seen that the contingent fee arrangement’s great strength lies in uncollectible cases, which really does not benefit the creditor at all. Given that these cases can usually be identified with some degree of accuracy by the creditor before proceeding, they can be eliminated from the equation. With just that simple step, the true risk and uncertainty can be well managed, and the business can stop paying someone else to manage the risk. A savvy creditor can then retain quality counsel on an hourly basis, and begin to pay only for the legal services he uses, maximizing the economic recovery and eliminating unnecessary waste of resources. That is true economy.

]]> Thoughts on Establishing a New Business tag:blog.johnmgmurphylaw.com,2007-02-11:bfe3e097-3cbe-4e0f-9a9d-0c034476bdf9 John Murphy 2007-02-17T20:16:55Z 2007-02-11T20:18:00Z There was some unspoken dialog behind my first post -- those of you that know me may have guessed. What I had in mind, but couldn't say at that point, was that after many years of practice with my former firm I was taking my practice elsewhere -- establishing The Law Office of John M.G. Murphy, LLC. While my practice is not exactly a "start-up," I learned quite a few things that I believe apply directly to start up businesses. I hope these thoughts are helpful -- my authority is impeccable.

    1.   Planning is a very good thing. There comes a point, though, when you can't advance the ball any further through planning, and have to act. Some questions will remain unanswered, such as the precise source and amount of the business you expect. If you won't move until you answer all the questions, if you try to take all the risk out of the venture, you will never shove off. Business unavoidably entails some degree of risk. If it had no risk, everybody would be doing it.

    2.   In a service business, relationships are far more important than any other kind of marketing. Do all you can to develop and maintain relationships with your customer/client base well before you need them. Do a good job -- be responsive -- take an interest in their personal circumstances even if you feel like you don't have the time. These things are good in themselves, but you will also find that none of this will be wasted.

     3.    The things you worry about before launching a new business are rarely as hard as you think they are. The truth in the business startup context seems very close to what I tell my clients in another context (testifying in court or at deposition) -- a little bit of fear, better called caution, is not necessarily a bad thing. It keeps us sharp. But, if you are so consumed with worry and fear that you can't think of anything else, you will be like a deer in the headlights, and never move. Once you have made reasonable plans and preparations, it is time to begin. See Matthew 6:25-27.

    4.   Never, never, never burn your bridges. You will need the relationships you made in your last circumstance in your next. There is nothing to be gained by pettiness.

    5.   Get the help you need. A client of mine that is a very successful entrepreneur once said to me, "John, you've heard that 90 percent of new businesses fail. But do you know why they fail? In most cases, the owner tries to do everything himself, and he burns out!" There is a lot of truth in that. As soon as you can afford it, hire help. See Exodus 18:17-23.

    6.   Do the right thing, even if it hurts. My brother told me a variation of this one years ago, and I remembered it. I can't think of a rule of more universal application. See Psalm 15-3-5.

    7.    We need to make money, but there are things much more important than simply making money. Focus on them, and the rest will come. See Proverbs 11:16 (isn't that deep? -- "a ruthless man gains only wealth -- how much is he missing?"). See also Matthew 6:33.

    8.   Relax and enjoy the ride. If your head and heart are in the right place, ultimately you are going to be OK. See Psalm 27:35.

    9.   Life is a great adventure. I am not sure that we are made to simply be safe. See Matthew 25-14-30. Often, inertia may represent a somewhat understandable avoidance of fears that themselves are unreasonable and not well grounded. More and more I think that we are called upon to make the absolute best of what is given to each of us. Time is short, so get started.


]]> Will you chase the lion, or will the lion chase you? tag:blog.johnmgmurphylaw.com,2007-01-04:29c54f79-7fb9-4a91-b605-bfd5975fa9af John Murphy 2007-01-05T15:39:24Z 2007-01-04T22:27:00Z Welcome to my blog, LionSlayer. This is my first blogging effort; I hope you like it.

You may find the name intriguing -- I found its source intriguing. It comes from a talk I heard a few months ago given by a really inspiring young D.C. preacher. He spoke of a rather obscure biblical character -- Benaiah, the heart of whose story is told in just a few verses starting at II Samuel 23:20. Benaiah was one of King David's top soldiers, although Samuel makes a point of reporting that he just missed the cut of the top three that became known as David's Mighty Men. But this Benaiah was a bold character nonetheless -- he was the chief bodyguard to David, a giant slayer like David himself, and an improvising martial artist worthy of today's action flicks. Benaiah's marquee deed is the source of this blog name -- Samuel relates that among these other things, Benaiah once followed a lion down a slippery, snowy slope into a pit, confronted it there, and killed it.

Usually we don't think about chasing a lion, particularly into a snowy pit. Usually we think of the lion chasing us. But this young preacher's challenge to the men he spoke to that day was, what will you do with your life? Will the lion chase you? Or will you, like Benaiah, chase the lion? The choice is up to us.

I hope to post my thoughts here on my profession, the business world I serve in this profession, and life in general. Your comments are most welcome as well. I hope that as this blog develops, it will remain true to its name, and that we can chase that lion together.
]]>