If another company claims you owe them money, ignoring the situation will only make it worse. Understanding how the legal landscape works in Texas can help you protect your company’s assets and reputation.
Receiving a formal demand letter
Business-to-business (B2B) debt collection starkly differs from consumer collection. For one, the other business begins the process by sending you a formal demand letter. This document outlines the debt, interest and penalties, prompting you to settle immediately. As a corporate entity, you must respond through proper legal channels to avoid a costly automatic loss.
Escalating to a commercial lawsuit
When resolution is unsuccessful, the creditor will likely file a breach of contract lawsuit. In Texas justice courts, you typically have only 14 days to file a written answer. For county or district courts, that window is 20 days. Your absolute deadline to respond is the very next Monday at 10:00 a.m.
Failing to answer in time allows the creditor to obtain a default judgment. As a result, a judge can favor the other party, allowing them to pursue your business assets to settle unpaid dues and penalties.
Adopting a proactive approach is wise
Waiting before responding to a commercial collection action can jeopardize your case. Acting proactively should be your main focus, but it is worth noting that navigating this alone can be risky.
Consulting a business law attorney is advisable. With legal help, you can perform an audit on the formal demand letter and contract agreements to verify exact amounts and look for billing errors. They can also provide insights on negotiating with the collector before matters escalate into litigation.