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Part One of a three part series on how to write a credit application with teeth.

Before selling goods or providing services to a customer, you should take all possible steps to make sure that you will be paid. Toward that end, a signed credit application is essential. A good credit application will require, among other things, the following information:

1. Name of Entity

   You may be surprised to learn how many credit applications do not list the customer's correct legal name. If the potential customer is a corporation, you can check with the Secretary of State's Office at (617) 727-2850 to confirm the name, address and existence of the corporation as well as the names of its officers.

2. Type of Entity

   A potential customer may be an individual, corporation, partnership, limited partnership, family trust, nominee trust or a proprietorship. This information enables you to determine if the person signing the application has binding authority. It may also raise a red flag as to potential collection difficulties in the event of a sudden outbreak of "deadbeatitis".

3. Address of Entity

   Do not merely trust your potential customer's representations. Verify everything. If the address listed does not match that at the Secretary of State's Office, ask why.

4. Whether Entity Owns or Rents

   This will provide you with valuable insight into the financial strength and weakness of your customer.

5. Name of Landlord

   This information may disclose a hidden asset.

Inclusion of these items, along with others referred to in the next two issues of this Newsletter, will help you sink your teeth into your customer before he takes a bite out of your bottom line.

In the world of debt collection litigation, the essence of the battle is control. At some point, some debtors either fail or neglect to pay. Some debtors do not pay because they are using you for creditor financing (using your money to purchase and pay for other materials or services from your competition).

Others do not pay because they simply want to spite you. Still others claim that they have no money. Fortunately, several statutes and court rules exist to help you in collecting from the Can Not Pays ("CANOPS") and the Will Not Pay ("WILLNOPS") of this world.

In your battle to regain control from your CANOPS and WILLNOPS, several weapons exist in your legal arsenal. These include, but are not limited to bank attachments, real estate attachments, personal property attachments, keeper attachments, and injunctions.

Unlike some other attachments, freezing your debtor's bank account so that they can not use or withdraw "their" money usually has a sudden impact on the debtor. Even when the attachment does not catch any funds, it can bring the debtor to the table for meaningful settlement discussions. I recommend making a copy of every check that you receive from your customers for three reasons:

1. Accounting verification

2. Indicates continuous banking changes (a red flag); and

3. Affords the collection attorney attachment targets

If you do not have copies of the debtor's checks and the amount of the debt is substantial, I recommend that you invest in an asset locator to help paint your target. This often transforms a stab in the dark into a "smart bomb".

Armed with knowledge of the debtor's last known bank, I can bring a motion for bank attachment. There are two ways to obtain a bank attachment - with notice and ex parte (without notice).

It is important to remember that just because you have attached the money in a debtor's account does not automatically entitle you to that money. Rather, it is merely a form of gaining security- monies are held aside by the Bank to pay you after you have won the battle. Simply stated, the role of prejudgment security is to help ensure that after you have won the battle, you win the war and now control your own money.

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