If litigation is required, the lawsuit typically must be filed in the venue of the debtor. The exception to this rule is when the debtor has signed a document that states the venue and jurisdiction will be someplace else. Usually the only time this happens is when the debtor has signed a credit application which states that venue and jurisdiction is in a location specified by the creditor. We may also see this when there is an executed contract between the parties. A simple statement on invoice is not sufficient – the debtor must actually sign a document agreeing that venue and jurisdiction is not in their hometown.
Over the years, we have developed relationships with debt collection lawyers who are based all over the country. Having this network enables our clients to litigate when necessary at a dramatically reduced cost. These debt collection lawyers will work on behalf of The Kaplan Group and our clients on a contingency basis. Clients still need to pay for all out-of-pocket expenses associated with the litigation process. This includes filing fees, process servers, hearing fees and costs for judgment collection efforts such as levies and garnishments. The cost advance may be as little as $250 and very rarely does it get above $1,000.
The contingency rate charged by debt collection lawyers is higher than the contingency rate charged by The Kaplan Group. In some cases, the lawyer may also want a small non-contingent fee. We try to use attorneys who specialize as commercial debt collection lawyers as we have found over the years that they do the best job for our clients. If we are unsuccessful collecting under The Kaplan Group and our in house law office, we will discuss the facts and circumstances internally to determine if we think litigation might be warranted. Our recommendation will be based on a return on investment analysis – do we think that the client has a reasonable chance of getting a significant return on their investment in the litigation costs.
If we believe litigation may be warranted, we will report this to the client along with an estimated cost (both out-of-pocket costs and possible non-contingent fee). If the client expresses interest, we will then contact one or more collection lawyers to get a firm quote for the specific matter. We will communicate this quote to the client and will proceed to litigation only if the client approves it in writing and advances upfront the initial costs.
Upon receipt of the initial costs and written approval, we will forward the funds and the appropriate paperwork to the debt collection attorney.
We do not use debt collection lawyers such as the firm Cohen & Slamowitz of Woodbury, N.Y. A recent article in the New York Times says this firm has been filing more than 80,000 lawsuits a year for the last three years. They apparently use software that can “take a file and run it through the entire legal system automatically”. While this may be a cost effective approach for small amounts owed by individuals, we do not believe this is effective for large commercial collection claims. That’s why we carefully choose the debt collection lawyers that we recommend to our clients.
