Commercial Collections Blog

Thanksgiving Holiday Season

From The Desk of Jerry Curtis

Dear Customer:

We at Burt & Associates would like to take a moment during this Thanksgiving holiday season to express our gratitude and continued commitment to you our client. We hope you and your families are tremendously blessed throughout the holiday season. Be assured that we are working hard to provide your business with the needed financial and accounts receivables services you have come to expect from Burt & Associates. As always, should you have any questions, comments or suggestions, please do not hesitate to contact your National Account Executive today.

With warmest regards,

Jerry Curtis
President & CEO

Educational Tidbits For Today’s Credit Executive
Collections Efforts in a Bankruptcy Filing

When a debtor files for bankruptcy, whether it be under Chapter 7, 11, or 13, and whether it be a voluntary filing or involuntary filing, “all entities” are automatically and immediately stayed from taking any action or continuing any legal action against the debtor. This includes attempts to collect debt from the debtor by any party. This also applies to the enforcement of liens against the debtor’s property. This stay also relates to repossessions of property. If the creditor had repossessed property prior to the filing of the case but had disposed of it by sale, the creditor could, and the key word here is “could”, be required to make restitution of that asset to the bankruptcy estate.

The Credit Manager’s Q&A Corner

QUESTION: If a debtor writes on a check “acceptance of this check denotes payment in full”, should you cash it?

ANSWER: If you receive a payment from a debtor and the words “acceptance of this check denotes payment in full” should you cash the check? The answer differs depending on the state law and the facts of the situation. One of the main issues in determining whether a satisfaction of a debt exists is whether there is a “bona fide” dispute between the parties regarding the amount owed. Generally, when there is a bona fide dispute between the parties as to the amount of a balance owing, one party can offer to pay a specific amount in full payment of that debt. The other party can accept the offer in cash or check — which is referred to as “accord and satisfaction”. This is essentially like a new contract. It should be noted that a dispute does not have to be based on a solid foundation but there must be some justification to it.

It should be noted, however, that a creditor who receives such a check may not simply cross out the language and write “under protest” in order to get around the “accord and satisfaction” concept.

It should be noted that while some companies process thousands of checks, nevertheless, some courts have held that when a creditor’s accounting department cashes a debtor’s check in ignorance that it was an attempt to “accord and satisfaction”, a subsequent timely protest by the creditor defeated a finding of that “accord and satisfaction”. In some states, however, where a claim is disputed and a check is offered for settlement, the retention of a check constitutes an “accord and satisfaction” settlement regardless of any protest by the creditor.

It should also be noted that under Uniform Commercial Code 3-311 a creditor has the right to revoke an “accord and satisfaction”.

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