CHAPTER III UNUSUAL, UNIQUE AND RESOURCEFUL METHODS It is necessary that a successful credit man or collector should be resourceful. Frequently an unexpected condition has arisen suddenly in the debtor's affairs that strikes consternation in the heart of his creditors and cause no end of concern to the credit man or collector representing an institution holding a claim against such debtor. Even though a man may be well poised he is apt to get panicky, and the fear of loss may jeopardize his ability to use calm and deliberate judgment, or interfere with his ability to determine just. what is the best course to pursue. One of the greatest attributes one exercising the function of a collector can have is foresight-not in the sense of having the foresight of a prophet, nor in the sense that future contingencies must be forecasted, but in the sense that if given all the present facts concerning the finances, obligations and operations of a business, what the probable condition of that business will be at a certain time in the future. The time to weigh this condition thoroughly is at the time of default in payment. If full information shows there is some justifiable explanation or reason for default which is of a temporary character and which in the usual course of events will be almost certain to be overcome, there is no great cause for alarm; but if knowledge of all existing facts shows a danger signal ahead, the credit man or collector is then obliged to promptly use his forethought and judgment. Some suggestions are offered in this chapter as to ensuring the ultimate payment of an obligation from an involved debtor by obtaining security. The line of approach must naturally and necessarily be largely determined by the existing circumstances, the character of the business and other varying factors. For this reason the suggestions here offered are not offered in the order that should be followed in an attempt to obtain the necessary security, but are offered in addition to some of those usually followed, existing circumstances to determine which of the suggestions, if any, should be tried out on the defaulting debtor. The usual defaulting debtor owes an open account. If the credit man or collector feels that an extension can be safely granted on such an account for a definite time, with reasonable assurance that at the end of the extension the debtor will be able to meet his engagement, either an unsecured or an endorsed promissory note may be accepted, bearing interest. Experience has shown this is a good general rule to follow. The execution of a note impresses the debtor with the fact that the obligation must be met at the time he has agreed to pay it, if extended, and if there is any misgiving on his part as to his ability to pay the obligation when the extension has expired it will usually be voiced at the time the note is executed, for then the debtor is face to face with a very definite and concrete obligation. Furthermore, he realizes the fact that he is being accommodated, and very few debtors will object to paying the current rate of interest for accommodation. Many credit men provide in the form of note used that the rate of interest shall be the prevailing current rate, but that after maturity the obligation shall draw interest at 12%, or even higher, so that in case the note must be carried after maturity the debtor must pay something more than a mere prevailing market rate to money borrowers. This is natural, as merchants are not in the banking business. A promissory note should also be taken from the contentious type of debtor if he seeks an extension. Many complaints are made on a pretext to gain time, and if it is thought the part of wisdom to grant the extension sought, a note should be taken to forever cut off any further claim from that debtor. Furthermore, if legal action should be required later, it is a simple matter to prove up the obligation in court if it is in the form of a promissory note, the only real defense to a promissory note being lack of consideration or fraud, whereas proving the order, shipment or receipt of the goods on a long open book account is in case of a contest, often difficult. The note should in all cases provide that the debtor should pay attorney's fees, either 10% of the principal or a statement that he is obligated to pay all attorney's fees accrued in the collection thereof. Such an obligation on the part of the debtor may not be legally enforced in all jurisdictions, but in most states such a condition in a note has been held to be good; even, however, where there may be some question about such a provision it is desirable to have it in the note, as many debtors are not aware of the legality of such a clause, and it furnishes a credit man with a wonderful argument to be able to say that he hopes the debtor will not compel him to place the matter in the hands of an attorney to enforce payment, which not only will add the burden of court costs to the debtor but compel him to pay for services of his attorney and also compel him to pay your attorney as well. Very few men are so obstinate, regardless of temperament, that they will deliberately permit a creditor to take legal action to enforce payment of a note when they know they are obliged to pay both the lawyer prosecuting the claim and the lawyer defending the claim and court costs as well. The following form of promissory note has been used and found satisfactory. Attention is called to the printed waiver on the back thereof, as this is a decided advantage to the creditor if the note is endorsed. (NOTE FORM) 19... No.... .after date for value received... pay to JOHN DOE & Co., Inc., or order at. promise to Dollars with interest from date .per cent until paid, at the rate of. per annum, payable quarterly; and in case of default in payment of interest when due, both principal and interest shall immediately become due and payable at the option of the holder of this note. Should this note be placed in the hands of an attorney for collection..... .agree to pay an additional sum of ten per cent on principal as attorney's fees. Principal and interest payable in gold coin of the United States. Address 66 (WAIVER.) (On Back of Note) I, (or we) hereby guarantee payment, jointly and severally, of the within note or any renewal or extension thereof and all expense of collection thereof and all expense incurred in enforcing this guaranty and waive demand, presentment for payment, protest, and notice of protest, and consent that the time for payment may be extended without notice to me (or us). If it is determined that some security must be taken, a collateral note should be used. The character of security demanded may be stocks or bonds, or sometimes a bill of sale to personal property may be demanded as collateral, or a deed to real property. The average merchant does not usually have either stocks or bonds that he can furnish as collateral, and a bill |