Case Introduction
Creditor: A US company
Debtor: A technology company in Shenzhen, China
Debt Period: 24 months
Debt Amount: USD 216,038.748
In September 2019, the US company (the creditor) got a chip order (which worth USD 360,064.58) from a Shenzhen company (the debtor). According to the contract, the debtor should pay 40% as deposit and the rest should be paid by OA 30 payment method.
The Outbreak of Covid-19 Pandemic suspended the payment
The creditor fulfilled their contract duty on time. However, when it was the time for the debtor to pay, COVID-19 outbreak in China had a huge impact on the debtor’s production and finance. As a result, the debtor asked for a postpone on their payment. Once the pandemic situation became better, the debtor would pay the money immediately.
The rest payment seems impossible
During this period, the creditor paid close attention to the COVID situation in China and contacted with the debtor closely to let them pay the rest. But until the COVID situation became better, the debtor still found many excuses to delay the payment. The creditor using phone calls, emails to press the debtor to pay the rest with no good result. As China has strict COVID prevention and control policy, it is hard for the US company to send their staff to China to collect the debt. So the US company asked Gladtrust for help in February 2022.
Collection Process
1. The collection lawyer started initial research on the debtor and found there were no litigation cases on this company. The reputation of this company was quite good. From their financial data, there was no abnormal financial situation of the debtor.
After the initial research, the collection lawyer thought the debtor has the payment ability. Besides, the debtor really pays attention to their corporate image and their brand reputation.
2. The collection lawyer contacted the debtor immediately. The debtor said due to the time period was quite long, they need some documents related to the debt to check. The collection lawyer sent the related documents and the date for further discussion on this case.
Due to accident, the case moved back to the starting point
3. On the date that the debtor promised for further discussion, the collection lawyer contacted the debtor. But the person answered the phone said the previous manager has resigned from the company. They need the documents sent to the new manager for further discussion. So the collection lawyer sent the documents again. However, when the manager knew what happened, he found many excuses like going on business trips or having meetings to delay the progress of the case.
Find the important breakthrough point to advance the case
4. The collection lawyer used their own resource to do a fully investigation on the debtor and found the debtor was preparing a major bidding event. Once they got litigation and their credit problem being spread at this time, it would had a negative impact on the debtor’s bidding. The collection lawyer decided to use this as a pressing point to let the debtor pay back the money.
5.The collection lawyer made a legal letter and sent to the debtor’s legal representative, senior manager and the contact person to let them respond. In the letter, the collection lawyer also mentioned what result would led to if the debtor did not respond.
The pressing method came into effect and the debtor paid the money
6. On the 4th day since the legal letter sent to the debtor, the debtor’s senior manager contacted the collection lawyer to discuss the payment. The debtor’s senior manager said they have sent all the documents to their financial department. If there were no mistakes on the amount, they would pay the money.
7. The collection lawyer continued to pressing the debtor. Although the debtor wants to use business trip as an excuse to delay the payment, with the continuous efforts of the collection lawyer, the creditor got USD 216,038.748 in July 2022.
Lesson of this case
1. Strictly obey the terms of the contract. When the buyer changes the payment time, both sides need to sign an agreement.
In this case, due to the payment occurred from the end of 2019 to the beginning of 2020, which was COVID outbreak in China. The debtor asked for payment extension. Although the outside factors cannot be controlled, the creditor as the exporter should issues new contract to lock the payment period to guarantees their debt rights.
2. Using local collection advantage to find the breakthrough point and press the debtor to pay.
In this case, the collection lawyer found that the debtor had a major bidding event. If the creditor taking legitimate actions to expose the debtor’s credit problem, this would have a negative impact on their bidding event. The collection lawyer using this as the breakthrough point to press the debtor and got an effective result.
3. Let the professionals collect the debt in a professional way.
In this case, the creditor has spent a huge amount of time and manpower to the debts for nearly 2 years with no effective result. When we compared their own efforts and professional collection company, it can be easily seen that with the help of professional company’s flexible collection method, the debt collection will become easier.