This article is Part Three in a seven-part series on how to structure sales and what to do when your customer fails to pay. You can find previous article in this series here: Structuring Sales to Ensure Payment, Signs of Trouble Before Payment Default. Please subscribe to this blog by entering your email in the box on the left, or check back weekly for additional articles in the series.
By understanding your position prior to or shortly after a default by the customer, it may be possible to negotiate favorable terms with the customer to avoid default, proceed with litigation against the customer before there is a deluge or prepare for a bankruptcy by the customer. To identify your options and rights as a vendor you must first determine the following:
1. Default provisions;
2. Default notice requirements;
3. Permitted interest, late charges and attorney fees;
4. The existence of guaranties (corporate or individual);
5. Existing or potential collateral and available equity; and
6. Where you would need to sue, i.e., jurisdiction. …