If you have a business in Chicago with clients or customers that could end up owing you a decent sum of money for your services, you may run into a situation where someone just can't pay you all of what you are owed when you are supposed to be paid.
Some just won't pay you at all, but others will ask to "pay what they can" when they can. Some may not pay you for an extended period of time, and then, out of the blue, they may pay you a little bit on the balance that is owed.
Read on as the Chicago business litigation lawyer at Ellis Legal explains more.
Being Flexible Can be Good
Certainly, it is always better to try to work out a solution with businesses or people who owe you money instead of rushing right into a collection lawsuit. You may think "something is better than nothing," and just take whatever is paid when it's paid—after all, the debtor is trying, in good faith, to pay.
That's logical thinking, and it can work—if it's done correctly. But there are pitfalls to this strategy.
Accord and Satisfaction
Whether purposeful or not, many debtors will send a partial payment with a notation (often on a check) that says" in full payment" or similar language. Be very careful, as legally, if you are sent money with some kind of notation (or even a separate email or text to that effect), that can be seen as an accord and satisfaction.
That means that the partial payment you accepted also became your acceptance of the debtor's "terms," specifically, that what was paid satisfies 100% of the debt owed. Otherwise, it will be very hard for you to convince a court.
A Real Payment Plan
If you do want to accept a partial payment or any kind of payment plan, it is important to note to the debtor that acceptance of partial payments doesn't affect or alter the balance on the debt itself. That understanding should be mutual, before you cash the debtor's checks or accept the debtor's money in any form.
If your debt had a written contract attached to it when it was first incurred, you can put in "no waiver" clauses or similar language that specifically gives you the right to accept partial payments or late payments, so that's clear from the beginning, without sacrificing any of your rights under the agreement.
The Entire Debt
Payment plans should also give you the right to collect the entirety of the debt, plus attorney's fees, if there is a default on the payment plan. For example, if the debtor owes you $50,000, and you agree it can pay $40,000 in a payment plan, and there is a default on the payment plan, you want to maintain the right to sue for the full $50,000—not the reduced amount.
Speak with an experienced and resourceful Chicago business litigation attorney at Ellis Legal at (312) 967-7629 today if your business has a business contract lawsuit. We can help you stay out of legal trouble.