NACM Gateway Central Credit Conference & Expo

1. NACM Gateway Central Credit Conference & Expo “Debt Prevention and Recovery Strategies” Gamache & Myers, P.C. 1000 Camera Ave, Ste A St Louis MO 63126 314-835-6600 314-835-6604 (fax) davidgamache@gmcollects.com

2. NACM Gateway Central Credit Conference & Expo “Debt Prevention and Recovery Strategies” Presented By: David R. Gamache, Attorney at Law Donald A. Horowitz, Attorney at Law & Debbie Stolte NACM, Director of Collections

3. WELCOME • Introduction • Timing & Scheduling • Materials • Format • Questions / Answers

4. PURPOSE OF THE PROGRAM This program is designed to assist a creditor in identifying critical issues to avoid delinquent accounts and increase the likelihood of a successful collection on bad debt.

5. Debt Prevention and Recovery Strategies FIVE CONCEPTS 1. Knowing your customer 2. Documenting business transactions 3. Periodic account review 4. Agency – debt recovery 5. Legal – debt recovery

6. Knowing Your Customer • Who is your Customer? • Full Legal Name • Corporate Status • Ownership • Relevance of Information

7. Knowing Your Customer • Importance of a Good Credit Application • Provides a starting point • Sorts out facts • Focus attention sales persons • Helps us identify issues where PG • might be appropriate • Information useful in granting credit • and preparing for unforeseen

8. Knowing Your Customer • Basic Corporate Status • Types of Business Entities • (Corporation, Partnership, LLC, Properitership) • Standing with State • Where is this information found

9. Knowing Your Customer • Corporate Status Information • National Website • Missouri State Website

10. Knowing Your Customer National Website (http://www.nass.org)

11. Knowing Your Customer National Website (http://www.nass.org)

12. Knowing Your Customer Missouri Website (http://www.sos.mo.gov)

13. Knowing Your Customer Missouri Website (http://www.sos.mo.gov)

14. Knowing Your Customer Missouri Website (http://www.sos.mo.gov)

15. Knowing Your Customer • Court Records • Where? • http://www.courts.mo.gove/casenet • Why? • Bankruptcy Information • Pacer – subscription service • VCIS # • Eastern District – 888-223-6431 • Western District – 888-205-2527 • Accurint / Banko

16. Knowing Your Customer • Creditworthiness • CBR / D&B • Bank References • Trade References • You’re the Experts

17. Knowing Your Customer • Credit Policies • Circumstances for which credit will • be granted • Circumstances under which credit • will be suspended • Setting limits and controls

18. Documenting Business Transactions • Importance of Contract • Interest • Attorney Fees • Collections Costs • Proper party authority • Obstacles to contract / sales driven

19. Documenting Business Transactions • Confirm Merchant’s Writing • Document, Document • Emails • Faxes • Correspondence

20. Documenting Business Transactions • Other Writings • Purchase Orders • Invoices • Bills of Sale • Bills of Lading

21. Documenting Business Transactions • Use of Professionals • Attorney • Accountant • Telephone

22. Periodic Account Review • Aging • Payment patterns / purchase patterns • Warning signs - #, mail return, personnel changes • Changes of Ownership • Sales • Transfer • Death • Resignations

23. Periodic Account Review • Document Update • Credit Limits / Increase & Decrease • Plan for Uncollectible • - Copy checks

24. Periodic Account Review • Knowing when to hold them and knowing when to fold them • Studies on turn over debt for collection • Capacity to recovering bad debt • Expectations of recovery debt & costs

25. AGENCY – DEBT RECOVERY When do you send an account to a collection agency? Is there a correct answer? COLLECTABILITY PERCENTAGES BASED ON THE AGE OF THE ACCOUNT Time FrameCollectability percentages Due Date 94.9% 30 Days Past Due 89.9% 60 Days Past Due 81.3% 90 Days Past Due 69.6% 6 Months Past Due 52.1% 9 Months Past Due 39.1% One Year 22.8% Two Years 9.3% ** Figures based on CLLA Survey Information TO MAKE A LONG STORY SHORT, THE LONGER YOU HOLD ONTO AN ACCOUNT THE MORE DIFFICULT IT IS TO COLLECT … The Truth is in the numbers above.

26. AGENCY – DEBT RECOVERY • How does your credit department work a collection account? • Letters • Letters and Calls • Dedicated Collectors • Dialer • Skip-tracing

27. AGENCY – DEBT RECOVERY • Benefits of a Collection Agency • Collecting is their only job! • Have better tools and resources • Less of a negative impact towards your company name • Familiarity with collection laws in different states

28. LEGAL – DEBT RECOVERY THE COURT PROCESS • File a lawsuit • Obtain service on the debtor • Obtain a judgment J U DG M E N T

29. EXAMPLE OF PETITION LEGAL – DEBT RECOVERY #______ IN THE CIRCUIT COURT OF ______ COUNTY ASSOCIATE JUDGE DIVISION STATE OF MISSOURI Plaintiff’s Name Here ) ) Plaintiff, ) Cause No. ) vs. ) Division No. ) Defendant’s Name Here ) SERVE AT: ) Defendant’s Address ) ) OR SERVE AT POE (IF LISTED): ) ) SUIT ON ACCOUNT Defendant. ) P E T I T I O N Comes now Plaintiff and for its cause of action states that: 1. It is organized and existing under and by virtue of law; that Defendant is a resident of _______, MO; that the debt sued upon arose in and Plaintiff's cause of action accrued in the State of Missouri.

30. EXAMPLE OF SUMMONS LEGAL – DEBT RECOVERY IN THE CIRCUIT COURT OF ST. LOUIS COUNTY, MO ____________ ____________ Plaintiff Case Number vs. ________________ Division: Defendant Court Date: Time: Day: SUMMONS THE STATE OF MISSOURI TO: DEFENDANT (1) DEFENDANT’S NAME You are hereby summoned to appear in the above named division, courts building, 7900 Carondelet Avenue, Clayton, Missouri on the above court date, and time then and thee to answer the complaint of the above named Plaintiff(s), which complaint demands judgment together with his costs expended against the Defendant(s). Each Defendant is hereby notified that if you fail to appear and answer at the time and place stated in this summons, judgment by default may be taken against you for the relief demanded in this complaint. Special needs: if you have special needs addressed by the Americans With Disabilities Act, please notify the circuit clerk’s office at 314/615-8029, Fax 314/615-2689, or TTY 314/615-4567, at least three business days in advance of the court proceeding. DATE ISSUED: ATTORNEY DAVID REID GAMACHE GAMACHE & MYERS, P.C. 1111 WOODS MILL RD, STE 180 TOWN & COUNTRY, MO 63017 (636) 891-8070 JOAN M. GILMER, Circuit Clerk By_________________________ Deputy Clerk

31. LEGAL – DEBT RECOVERY OBTAIN GOOD SERVICE • Sheriff or special process server • Skip trace if not served • Rule 17 (short deadline for service)

32. LEGAL – DEBT RECOVERY OBTAIN A JUDGMENT • Default (differs by Court) • Answer (not always required) • Admit • Deny • Defenses (many not valid - e.g., divorce decree and can’t afford to pay) • Consent Judgment • Discovery • MSJ • Narrow issues • Trial • Timing

33. LEGAL – DEBT RECOVERY COLLECTING A JUDGMENT • Garnishment • Property Execution • Transcribe Judgment • Credit Reporting • Judgment Debtor Examinations • Post-Judgment Discovery

34. LEGAL – DEBT RECOVERY WAGE GARNISMENT • Up to 180 days • 10 or 25% of net pay • Must serve employer • Do not serve the debtor! • Interrogatories - answers due 10 days after return date • Money due to Court 10 days after return date • Writ of sequestration - State and Municipal employees • Reasonable costs are recoverable by garnishee, upon motion by garnishee, from property subject to garnishment

35. LEGAL – DEBT RECOVERY BANK GARNISMENT • 30, 60, 90 180 • Must serve bank • Bank must freeze assets upon service • Interrogatories - answers due 10 days after return date • Money due to Court 10 days after return date • Exemptions: • $1,250 for an individual • $350 per unmarried dependant child • $600 “wild card” • Several others such as social security

36. LEGAL – DEBT RECOVERY BANK GARNISMENT – con’t • Judgment debtor must file verified exemption request with sheriff within 20 days of notice of exemption • Creditor then has 10 days to request hearing to contest exemption • Right of setoff

37. LEGAL – DEBT RECOVERY Property Executions • 30, 60, 90, 120 or 180 days • Sheriff’s sale • Risky - Plaintiff must pay costs and liens if sale doesn’t net enough • Exemptions - varies depending on type of property (e.g., $3,000 on motor vehicle)

38. LEGAL – DEBT RECOVERY Transcribing Judgments Foreign Judgments

39. LEGAL – DEBT RECOVERY Credit Reporting

40. LEGAL – DEBT RECOVERY Judgment Debtor Examination • Unsatisfied execution • Serve debtor with a citation • Ask questions • Produce documents • 5th Amendment and use immunity • Body Attachment

41. LEGAL – DEBT RECOVERY Post- Judgment Discovery • Effectiveness varies

42. LEGAL – DEBT RECOVERY Should I Go Legal? • Balance • Relationship • Degree of Commitment to Process • Costs • Time • Exposure • Viability of Debtor / Skip • Understanding there is no magic bullet but a great attention getter.

43. SUMMARY • Thank you • Questions