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10 Useful Tips for your Credit Department

Always obtain a signed, detailed credit application from your customer. This should include the names, home addresses and telephone numbers of all owners or principals, company banking information, trade references and a separately signed personal guarantee.
Review and update your customer's credit record on a yearly basis, verifying references, banking information and ownership. A new completed credit application is advisable.
Accurate records are essential. Forms such as purchase orders, proofs of delivery, credit memos and return authorizations should be readily available in case they are needed.
Be on the alert for changes in bank information, addresses, ownership and buying habits. This could signal that problems exist.
Credit groups in your industry can be helpful in establishing and maintaining credit lines and should be utilized whenever possible.
Be certain to contact the correct person when attempting to collect an outstanding balance or resolve a dispute.
Send all correspondence, such as statements and payment reminders, in a timely manner.
Try to resolve all account disputes as quickly as possible. If a dispute can not be resolved, promptly place the claim with a commercial collection agency.
Past due accounts seldom improve over time. Set a specific due date on all past due accounts. Advise your customers that, after this date, their account will be referred to a collection agency. Always follow through on this warning.
Use only collection agencies that are members of the Commercial Collection Agency Association of the Commercial Law League of America. These professional agencies are experienced, bonded and guided by an organizational code of ethics.

Glossary of terms

-- A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W --

Abeyance: Temporary inactivity, to hold in suspension; a situation waiting to be settled.

Abscond: To secretly hide, conceal oneself, withdraw or depart.

Acceleration Clause: A clause in contracts of debt which makes the entire amount due upon the debtor's default.

Acceptance: The act of affirming an offer, either expressly or by implication through conduct, so as to enter into a contract.

Accord And Satisfaction: An agreement between two or more persons or entities, which extinguishes an obligation or settles a claim or law suit.

Account: A statement or detailed explanation covering debits and credits between parties. A record of a financial transaction.

Accounts Receivable Financing: A continuing agreement by a bank, factor or other means of financing to (1) make a loan secured by its customer's receivables; (2) retain right of recourse for losses, and (3) advance funds on accounts without notice to borrower's customers.

Accommodation Endorser: A party who has put his or her name, without compensation, on commercial paper; in effect, a guarantor.

Acknowledgment: (1) Certification by a notary that the signature on the document was personally signed by the individual whose signature is affixed to the instrument. (2) A notice of something done or to be done.

Action: The formal means of pursuing or enforcing and recovering one's right in a court of law.

Actionable: Subject to, or affording grounds for an action or lawsuit.

Adjudication: The pronouncing of a judgment or decree in a lawsuit. In Bankruptcy the term refers to an order of the court declaring that the debtor is bankrupt.

Adjuster: A person who is employed to investigate, evaluate and effect collection or settle an account.

Administration: The management and disposition of an estate having no executor. Properly applied to all forms of management of a decedent estate.

Administrator or Administratrix: One appointed to manage and distribute an estate where the decedent has not left a will, or where for some reason an executor has not been appointed or qualified under the will.

Advanced Court Costs: Those funds advanced by the plaintiff so that counsel may pay the appropriate fees for the filing of suit, service of process, premiums on court bonds, trial fees, supplemental actions after judgment, etc. (Costs should not be confused with attorney's fees).

Affiant: A person who makes and signs an Affidavit.

Affidavit: A statement sworn to or affirmed before an official who is authorized to administer oaths--usually a notary public.

Affiliate: A business connected with another through common ownership or management.

Agency: An agency is a collection agency to which claims are referred for collection by creditors.

Agent: One who legally acts for another.

Aging of Accounts Receivable: A record of customers' accounts receivable and how long they have remained unpaid beyond the regular terms of sale.

Agreement: A contact (meeting of the minds) or arrangement for a consideration between two or more parties.

Allegation: A statement of a party to an action, setting out what he or she intends to prove or contend.

Amend: To correct an error, modify or alter a legal document.

Amortization: Provision for the gradual reduction of an obligation by periodically contributing to a fund to discharge a debt or make replacement when it becomes necessary.

Answer: A written statement made by a defendant setting forth the grounds of his or her defense.

Appeal: A request to a higher court to review, correct or reverse a lower court decision; the action which results if the request is granted.

Appearance: Coming into court as a party to a suit.

Arbitration: The determination of a dispute by a disinterested third person, or persons, selected by the disputants.

Arrangement: A plan by a debtor for settlement, satisfaction or extension of time for payment of unsecured debts.

Arrears: A past due obligation; an unpaid account.

Assent: A declaration of willingness to do something in compliance with a request.

Assess: To fix the rate or amount.

Assets: Items on a balance sheet representing the resources or property belonging to an individual or company. Anything owned having a money value.

Assignee: A person to whom some right or property is assigned, transferred or turned over by another.

Assignment: (1) A written contract for transfer of one's title, right or property to another; (2) In some states, a form used to transfer a claim to a collection agency for the benefit of the assigning creditor.

Assignment For The Benefit Of Creditors: A transfer to another by an insolvent debtor of any property real or personal for the payment of debts. This form of liquidation is generally simpler and usually offers greater dividends to creditors than does bankruptcy. Such a voluntary conveyance is without compulsion of law but is usually recognized by most creditors and regulated by law in some jurisdictions.

Assignor: One who makes an assignment.

Attachment: Taking property into custody of the court, either to satisfy a judgment ultimately to be rendered or as a method of acquiring jurisdiction.

Attorney Fees: The charge made by an attorney in the course of preparing and trying a law suit.

Attorney-In-Fact: A person, not necessarily a member of the Bar, authorized by another to act in his or her place. This authority is given by an instrument called a power of attorney.

Bad Debt: An account receivable which is not collectible and charged off by creditors.

Bad Debt Reserve: An account to which doubtful or uncollectible receivables are charged.

Bankrupt: A debtor adjudged insolvent by a court and whose property is liquidated, turned into cash and divided among creditors.

Bankruptcy: This is what a company files in their local court in order to protect themselves against creditors or show that they have no money to pay their bills.

Chapter 7: Total liquidation of all assets.
Chapter 9: Municipal bankruptcy.
Chapter 11: Reorganization of a corporate entity. Long term payout of outstanding creditors.
Chapter 12: Farm bankruptcy.
Chapter 13: Reorganization of individually owned assets.

Bench Warrant: A legal process issued by a court for the arrest of a person for failure to obey a previous order of the court.

Bill Of Exchange: A written order, which may be negotiable or non-negotiable, directing one party to pay a certain sum of money to the drawer or to a third person.

Bill Of Lading: Receipt and contract issued by a common carrier for the shipment of goods.

Bill Of Particulars: A formal written statement setting forth the details of a claim on which suit is brought; an itemization of the account.

Bill Of Sale: A written instrument by which one transfers his rights or interest in chattels and goods to another.

Bona Fide: In good faith.

Brief: A written or printed document prepared by an attorney to serve as the basis of an argument upon a case in court.

Bulk Sales Law: Statutes designed to prevent defrauding of creditors in the sale of stocks of goods in bulk by a debtor. Some states require notice of the proposed sale to all creditors in person or by mail. In some states it is only necessary that the notice of intended transfer be recorded or published.

Bulk Transfer: The transfer of inventory or trade fixtures or a major portion thereof not in the ordinary course of business.

Cash Discount: A cash premium or deduction for the payment made within a designated time. Usually offered to encourage prompt payment.

Cause: Grounds for a suit, litigation or action before a court.

Charge Off: A partial or complete reduction of the value of an asset.

Chattel: Any type of personal property as distinguished from real property.

Chattel Mortgage: Security for a debt or obligation in such form that upon failure of the mortgagor to comply with the terms of the contract, the property may pass to the mortgagee (creditor). In most areas replaced by Security Agreements under the Commercial Code, having substantially the same definition.

Citation: An act or order of the court by which a person is summoned or directed to appear in a proceeding; also, a reference to legal authority.

Citation Proceedings: see Supplemental Proceedings.

Claim: (1) A demand for payment. (2) An account placed for collection by a creditor.

Claim And Delivery: An action by a creditor to take back personal property or goods sold under a title-retaining agreement where the purchaser has defaulted under the terms of the agreement.

Client: A person or firm who engages the professional advice or services of another.

Collateral Security: Additional security pledged and which may be resorted to in case of failure of the principal security.

Collection Agency: (1) A professional service in the business of collection past-due accounts. (2) An organization authorized to represent a creditor (principal) as its collection agent.

Commercial Attorney: A lawyer in the general practice of law, knowledgeable in the field of creditors rights and remedies, and active in the handling of insolvencies and commercial collections.

Commercial Claim: A commercial claim is a claim which arises from an obligation to pay for goods sold or leased, services rendered, or monies loaned for use, in the conduct of a business or profession, and not for personal consumption.

Commission: A commission is the compensation payable by a creditor and earned by a receiver for his services in effecting collection of a commercial claim, in whole or in part, and is normally contingent and computed as a percentage of the sum collected.

Common Carrier: One who carries goods or persons for hire. Common carriers include trucking companies, railroads, taxicabs, buses and airlines.

Community Property: Property or profits owned and accumulated by a husband and wife in states having community property laws. Such property or profits are owned in common as a kind of marital partnership.

Complaint: The pleading or accusation (by a plaintiff) against a person as having committed an alleged offense or for the recovery of money.

Composition Settlement: An agreement by which each creditor is to take payment less than the amount owed in full settlement of its claim.

Compromise: An adjustment or arrangement by mutual consent, for settlement of an account or dispute.

Conditional Sales Contract: A contract for the sale of goods under which possession is delivered to the buyer but title retained by the seller, dependent upon due performance of conditions or repayment under terms of sale (terms and conditions governing conditional sales are statutory and the statutes of each state should be carefully reviewed before a conditional sale is made). In many areas, conditional sales contracts have been replaced by Security Agreements under the Commercial Code, having substantially the same definition.

Confession Of Judgment Note: A note in which (after maturity) the debtor permits an attorney to appear in court and have a judgment entered if payment is not made as agreed. (Many states restrict or prohibit the use of such notes.)

Conflict Of Interest: When the attorney cannot handle the file sent to him as he may represent the debtor on other cases or for personal reasons.

Consideration: The element in a contract without which no contract is binding. The reason which causes the contracting parties to enter into a contract. The thing given in exchange for the benefit which is to be derived from a contract; the compensation. The act, promise price or motive for which an agreement is entered into.

Consign: To give, send or transmit goods to a merchant, factor or agent for sale with title retained by seller, with payment delayed, generally until sale.

Consignee: The person or firm whom goods are consigned or shipped.

Consignment: An arrangement whereby the consignor (seller) remains the owner of the property until such time as the consignee (buyer) sells the goods; at which time the consignee generally holds the proceeds of the sale in trust for the benefit of the consignor.

Consignor: (1) One who makes a consignment. (2) One who makes delivery of a shipment or turns it over to a carrier for transportation and delivery.

Constable: A county officer of the court whose duties correspond to those of a sheriff in relation to civil process.

Contempt Of Court: Disobedience to the rules or orders of the court; (1) Those acts that are committed in the face of the court (punishable immediately) or, (2) When a person fails to obey a court order to perform or refrain from performing certain acts.

Contingent Fee: A fee to be paid only in the event of successful results.

Continuance: The adjournment or postponement of an action pending in court.

Contract: An agreement between two or more persons to do or not to do a particular thing: a meeting of the minds with a consideration.

Conversion: In bankruptcy, the converting of a case from one chapter to another.

Conveyance: The transfer of an interest in realty; a deed. Sometimes includes leases and mortgages.

Co-Signer: One of the joint signers of a document.

Corporation: One or more individuals (determined by local law) organized and treated by law as having a legal individuality distinct from that of its several members; vested with the capacity of continuous succession irrespective of changes in its membership. (A stockholder of a corporation is usually not liable to creditors of a corporation).

Cost Advance: A cost advance is a sum of money advanced by the creditor to the receiver, as a fund from which court costs are to be expended.

Counterclaim: A claim asserted by the defendant in opposition to or deduction from the claim of the plaintiff.

Credit: A seller's faith in a buyer's willingness and ability to pay for goods and services at a future date.

Credit Insurance: The insurance of accounts receivable, within certain limitations, against loss through insolvency or failure of a customer to pay. Such insurance does not usually provide for "normal" credit losses.

Credit Line: The assignment to each account of a credit limit indicating the maximum amount of credit to be extended.

Creditor: (1) A person (or firm) to whom a debt is owed by another person (or firm) called a debtor. (2) One to whom money is owed for a business transaction.

Creditors' Committee: A voluntary representative group of creditors who may examine the affairs of an insolvent debtor, advise as to the acceptability of a settlement, the continuation of a business, study the accountant's and appraiser's reports, act as a "watchdog" over an operating business and make recommendations to the appropriate groups or legal body so that creditors will realize the largest dividend possible.

Cross-Complaint: An action brought by a party sued--against the party who sued or against a third party.

Damages: Compensation (monetary) which may be recovered in the courts by any person who has suffered loss or injury to his person, property or rights through the unlawful act, omission or negligence of another.

Debt: A specified sum of money owing to one person from another, including not only the obligation of the debtor to pay, but the right of the creditor to receive and enforce payment.

Debtor: One indebted or owing money to another.

Decision: (1) A judgment or decree pronounced by a court in determination of a case. (2) Any formal deciding of a dispute.

Decree: An order of the court, determining the rights of all parties to a suit.

Deed: A written contract particularly to transfer ownership of property.

Defamation: Injuring one's character, reputation or good name by making false and malicious statements. (Includes both libel and slander)

Default: The failure to fulfill a duty, observe a promise, discharge an obligation, or perform an agreement.

Default Judgment: A judgment granted when the defendant fails to respond or appear.

Defendant: The person defending or denying a claim; the party against whom a suit or a charge is brought in court.

Defense: A denial by the defendant of the truth or validity of the plaintiff's complaint.

Defunct: Refers to a business that has ceased to exist or is without assets.

Delinquent: A past-due obligation or overdue account.

Demand Letter: Letter sent by the attorney's office when a claim is received. It notifies the debtor that the client has hired an attorney to collect the debt.

Denial: A legal form of pleading; refusing to admit the truth of a statement, charge, and so forth.

Deponent: One who makes deposition under oath and whose testimony is reduced to writing.

Deposition: Testimony given under oath outside of court for the purpose of obtaining information in preparation for a court trial.

Discharge: (1) To cancel or release an obligation. (2) To receive a discharge in bankruptcy is to be released from all or most debts.

Discovery: Pre-trial action for the discovery of facts or information in connection with a lawsuit.

Dishonor: Failure to make a payment of a negotiable instrument on its due date.

Dismissal: An order terminating the case prior to its normal end.

Dissolution Of A Corporation: (1) Termination by surrender or forfeiture of its charter by proceedings for winding up its operations under law. (2) Ending its existence.

Distribution: (1) One or more dividend payments made to creditors who have approved claims filed in a bankruptcy, assignment or receivership. (2) The marketing or selling of an item. (3) Division of shares.

Dividend: A sum of money paid and distributed to shareholders of a corporation--or creditors of an insolvent business.

Endorsement: The act of writing one's name on back of a note, bill, check or similar written instrument thereby making the endorser a party to the instrument and liable, under certain conditions, for its payment.

Equity: (1) The value less liabilities of a property or business. (2) Remedies under the law to determine fairness, right and justice.

Escrow: The delivery of property conditionally to a third person (escrow holder), who holds it until the happening of an agreed upon event and then redelivers it to the owner according to the terms of the agreement. Any funds being held by the "escrow holder" are then released and paid to approved claimants.

Estate: The interest which one may have in lands or other property. It may also refer to the property of a deceased person.

Execution: A court order issued to enforce a judgment. Execution also refers to completion of a written instrument by signing, sealing, acknowledging, and delivering the instrument.

Exempt: (1) To release or be free from some liability to which others are subject. (2) Property not available for seizure.

Exemption: The right given a debtor to retain authorized portions of his or her property, wages, or earnings from claims by creditors.

Factoring: A continuing agreement by a financial institution with its client, (1) to buy its open accounts receivable (with or without recourse for any credit losses), (2) generally to notify client's trade customers, (3) to assume the responsibilities for credit checking and collections.

Fictitious Trade Style: A term used in the transaction of business when the firm name does not clearly disclose the true name of the individual owner or partners.

Fiduciary: (1) A person entrusted with the duty to act for the benefit of another person. (2) A person in a position of trust and who manages money or property for another.

Filed Answer: Debtor indicates that he owes the debt and will pay it or he disputes the debt.

Filing Claims: To preserve a creditor?s rights and to receive its share of payment, it is often necessary to file a formal claim in a manner and within the proper time prescribed by law. Filing is generally required in bankruptcy matters, probate proceedings, assignments, receiverships and estates of minors and incompetents.

Fixed Assets: Any tangible property used in carrying on the operation of a business but will not be consumed or normally converted into cash (land, buildings, machinery, improvements, and so forth).

Forced Sale: A sale made under a court order and in the manner prescribed by law.

Foreclosure: A legal sale of mortgaged property by a creditor to obtain satisfaction of the mortgage out of the proceeds of the sale.

Foreign Corporation: A corporation created by and under the laws of a state other than the state in which it is doing business.

Forwarder: A forwarder is a person who or an entity which, as the agent of the creditor, refers claims to attorneys for collection. A forwarder may be an attorney, a collection agency, a credit bureau, a credit insurance company, or any other entity which acts on behalf of the creditor as its agent, in the referral of claims for collection.

Forwarding: The referral or placement of out of town clients by a collection agency with an attorney who acts on behalf of the creditor.

Forwarding Contract: A forwarding contract is the agreement entered into between the creditor (or the forwarder as the agent of the creditor and with the creditor's consent) and the receiver, specifying among other things the commission agreed upon between the receiver and the creditor as the receiver's compensation for effecting collection, in whole or in part, of a commercial claim.

Fraudulent Conveyance: A transfer of property with the intention to defraud a creditor or avoid payment of a debt.

Free Demand Letter: A precollection letter sent by a collection agency to a debtor requesting that payment be made to a creditor by a given date. No charge is made for payments received within the "Free Demand" period, but balances remaining unpaid are usually followed for collection at the agency's regular rates.

Garnishee: A person or entity having possession of money or property belonging to a defendant, who is served with a writ of attachment or execution.

Garnishment: The legal process by which property due to a debtor and in the hands of a third person is attached.

Guarantee: (1) To assume the liability for such debts of another in the event of his default. (2) A promise that a product will perform as advertised.

Guarantor: A person who undertakes to guaranty something or act as surety.

Hearing: Legal proceedings in which arguments of the interested parties are heard in court.

Homestead: To record a homestead, exempts such a home from legal execution or forced sale in satisfaction of certain debts, except any excess over the exempt value. Individual state laws apply.

Indemnify: To insure or secure someone against loss or damage; also, to make reimbursement to one for a loss already incurred.

Indemnity: An agreement to insure or reimburse another in case of damage or failure to fulfill an obligation.

Injunction: A writ or order by the court requiring the doing or refraining from doing of an act.

Insolvency: Condition of a person who is unable to pay his debts as they fall due. The general term is to be distinguished from a person who is bankrupt and whose liabilities exceed assets.

Interchange Bureaus: Associations organized to record and exchange or furnish information as to member's ledger experience and the manner in which customers meet their obligations.

Interrogatories: A series of formal written questions used in the examination of a party or a witness prior to trial.

Intestate: Dying and failing to bequeath ones property or leave a valid will.

Joint Liability: Liability imposed upon two or more persons.

Joint Tenancy: A joint holding of property by two or more persons with agreement that upon the death of one, the full title to the estate shall remain with the survivor.

Judgment: A formal court decree granting or denying a plaintiff's claim.

Judgment Proof: A judgment debtor from whom collection cannot be made. A person who has no assets or has concealed or removed property subject to execution.

Judicial Lien: A lien obtained by judgment, levy or other legal proceeding.

Jurisdiction: The authority by which courts hear and determine controversies.

Keeper: A custodian installed in a place of business by a levying officer under an execution or attachment, for the purpose of realizing payment from the defendant (debtor) either voluntarily or by a legal (forced) sale of the assets.

Law List: A directory of attorneys. It is usually indexed by states, cities and countries. Law lists are distributed by their publishers to attorneys and commercial agencies, making available a selection of attorneys to collect or sue accounts in their local areas.

Lease Contract: An agreement under which equipment or facilities can be obtained on a rental payment basis for a given period of time. Such an agreement provides the user facilities without making a capital outlay.

Legal Composition: Identification and description of the lawful ownership or title to a business.

Letter Of Credit: A letter addressed by a banker to a correspondent bank guaranteeing payment, when evidenced by documents confirming shipment of goods. This may be an irrevocable or revocable letter of credit.

Levy: An action by a court officer to satisfy an execution or attachment by the seizure and holding or sale of property.

Liabilities: Obligations or debts owed by a business to its creditors.

Libel: Written or printed words (or pictures) that degrade or defame a person.

Lien: A legal claim or hold which one person has upon the property of another as security for the payment of a debt or performance of an obligation.

Limited Partnership: A partnership consisting of one or more general partners who are jointly and severally responsible, and one or more special partners (limited) who are not liable for the debts of the partnership beyond their original financial commitments. To be effective, strict compliance with the law is required.

Liquidated Account: An account which is certain, fixed and settled as to amount by the act and agreement of the parties or through law.

Liquidation: "Winding up", going out of business, settling accounts and paying off any claims or obligations.

Marginal Business: A sale made to a credit risk from whom payment may be delayed because the business may not have sufficient operating capital.

Marshal: An officer of the court whose duties correspond to those of a Sheriff in relation to civil process.

Mercantile Agencies: Organizations which accumulate and disseminate credit and financial information to its subscribers (usually on a contractual fee basis).

Minor: A person who is under age or has not reached legal maturity as prescribed by a state.

Mortgage: A conditional conveyance of property as security for the payment of a debt or the performance of a duty, that becomes void upon payment or performance according to the stipulated terms; usually applicable to personal or real property. (See chattel mortgage).

Mortgagee: A person that takes or receives a mortgage.

Mortgagor: The party who makes a mortgage.

Motion: An application, either written or oral, addressed to the court requesting a ruling on a matter of law or equity.

Necessities Of Life: Essentials commonly required by all persons to maintain life (whatever their employment or status), e.g., food, clothing, shelter, medical care, light and heat, etc.

Negligence: The failure by a reasonable person to use sufficient care, diligence and skill which he required to use for the protection of others from injury or damage.

Negotiable (Instrument): An instrument obligating the payment of money which is transferable from one person to another by endorsement and delivery or by delivery only.

Net: (1) The full amount the customer is expected to pay. (2) The amount left after necessary deductions are taken out.

Net Worth: The total assets of a business less the total liabilities.

No Asset Case: An insolvent estate with no dividend available or possible for creditors.

Non-Contingent Suit Fee: Money sent to the attorney for filing a law suit. The money is kept by the attorney whether or not the debt is collected.

Non-Dischargeable Debt: Certain debts are not included in the debtor's discharge. Some are automatically excluded. Others to be excluded require action by the creditor.

Notice Of Protest: A formal statement that a certain bill of exchange, check or promissory note was presented for payment or acceptance, and that such payment or acceptance was refused.

Nulla Bona: Return of writ of execution by the sheriff after a search has been made and no assets found.

Objection: Protesting something and referring the question of its propriety or legality to the court.

Obligation: (1) A legal duty by which a person is bound to do or not to do a certain thing. (2) An amount of money one is legally bound to pay.

Offer: (1) To present a proposal for acceptance or rejection. (The unconditional acceptance of an offer creates a contract).

Open Book Account: Credit extended on goods or services sold and represented on the books and records of the seller as an account receivable.

Option: The exercise of the power of choice; also, a privilege which may give one the exclusive right to buy or sell property at a given price within a specified time.

Outlawed Account: A claim not legally enforceable and barred by varying state statute of limitations because of age.

Paid Direct: Payment made directly to a creditor on an account being handled by a collection agency or an attorney.

Particulars: A written, detailed statement of the items of a plaintiff's demand, or the defendant's setoff in a lawsuit.

Partnership: An association of two or more persons (or entities) to carry on as co-owners of a business and sharing in its profits or losses (not necessarily equally).

Past-Due: Payment delayed beyond an agreed upon settlement date.

Perfection: The proper recording or filing of an instrument, thereby giving notice to the world; usually applied to the perfecting of a security interest under the Uniform Commercial Code.

Perjury: False swearing; a willful false statement given under oath in a judicial proceeding.

Personal Property: Things temporary or movable as distinguished from real property.

Petition: (1) An application in writing for an order of the court. (2) A request to a public officer.

Petition In Bankruptcy: An official document filed in a Federal court to have a debtor declared bankrupt.

Plaintiff: One who commences a court action against a defendant.

Pleadings: Formal allegations, either written or oral, make by the parties of a lawsuit stating their respective claims and defenses in the action.

Pledge: (1) A deposit of personal property as a security for the performance of an act or satisfaction of an obligation. (2) A promise.

Power Of Attorney: An instrument in writing authorizing another to act as agent on behalf of the person whose signature appears on the document.

Preference: Paying or securing to one or more creditors, by an insolvent debtor, of all or a part of a claim to the exclusion of other creditors. (2) Special advantage given to someone.

Preferred Creditor: A priority claimed by a creditor over others.

Principal: (1) The owner or person primarily liable. (2) One who appoints an agent. (3) An original sum of money before charges are added.

Principle: An accepted, fundamental rule or truth to be used as a guide in one's action or conduct.

Priorities: (1) Debts entitled to payment before general creditors in bankruptcy. (2) The right held by a creditor by virtue of a lien or security to be satisfied out of the debtor's assets before other creditors. (3) Those things which must be dealt with before others.

Probate: Official processing of a will to prove its authenticity. Upon accepting the validity of a will, there is generally an administration of the estate to carry out the directions of the deceased, to discover and collect assets, to pay all proper claims and taxes and to make ultimate distribution to those entitled to it.

Promissory Note: A signed promise in writing to pay a specified sum at an expressed time on demand, or at sight to the holder of the note.

Proof: Evidence which establishes truth or falsehood of fact.

Proof Of Claim: (1) A claim form required to be filed with the court in the estate of a bankrupt (or similar proceedings), if a creditor is to receive payment (or its pro-rata share) of a debt owed. (2) A sworn statement made by an insurance claimant.

Property: Anything which is the subject of ownership whether real or personal, tangible or intangible.

Proprietorship: Single and exclusive ownership of a business.

Pro-Rata: A calculated proportionate share or sum.

Pro-Rate: Voluntary cash payment and distribution by a debtor of a uniform percentage.

Protest: A formal document declaring the dishonor of a negotiable instrument.

Quash: To overthrow; to make void or annul a court order; to cancel.

Quid Pro Quo: The giving of one valuable thing for another, something given for something.

Quitclaim: To release or relinquish claim or title to, especially in deeds to real property.

Ratify: To approve or confirm a contract or act performed by another.

Real Property: Land and everything that is permanently affixed to it.

Receiver: A person who is appointed by a court to receive, and hold in trust, property in litigation.

Receivership: A court procedure to help a distressed debtor or to resolve a dispute. If this cannot be accomplished, liquidation may result.

Reclamation: A term used in bankruptcy to denote a right or proceeding on the part of a person having title to property to recover the same when it is in possession of the bankrupt, debtor, receiver or trustee.

Record: (1) To place on file in official books. The recording of a judgment in the county of the judgment debtor becomes a lien on all the debtor's real property not exempt from execution. (2) A formal written account.

Release: To relinquish or surrender a privilege, right or claim by one in favor of another.

Remittance: When a debtor makes payment to the attorney, the attorney puts the money into his account to clear. After it has cleared, the attorney makes a remittance to the forwarder, which is less his commissions.

Reorganization (under the Bankruptcy Act): Debtor reorganizes, rather than liquidates, and creditors claim future earnings of the bankrupt, rather than property presently held.

Replevin: An action by an attorney to recover property sold under contract when the purchaser refuses to surrender such goods voluntarily and is in default of the terms of the agreement.

Repossession: (see claim and delivery)

Rescind: To void or cancel an agreement or contract.

Retail Claim: An account for collection against a consumer debtor for an obligation incurred for personal, family or household purposes.

Retainer: A retainer is a sum of money paid in advance to retain the services of an attorney, and should be taken into account in determining the ultimate fee to be charged for services rendered and results obtained.

Retroactive: Effective as of a past date.

Return: The answer made by a Sheriff, or other officer, to the court stating what has been done to execute a writ previously issued.

Reversed: A term used by a higher court to indicate that the decision of the lower court has been set aside.

Revoked: To recall, cancel or wipe out the legal effect of something.

Sale: Transfer of ownership and possession of property from one to another for a sum of money or for other consideration.

Satisfaction: The discharge of an obligation by paying a party what is due.

Satisfaction Of Judgment: Written evidence that a recorded judgment has been paid or settled.

"Scam" Operation: (1) A business organized to deliberately incur debts and to willfully defraud creditors by misrepresentations, overbuys, and without intention of making payment for goods received. (2) A fraudulent failure or bankruptcy.

Schedules: Technically, the schedules of assets and liabilities; is also commonly used to include the statement of financial affairs.

They show:
(1) The debtor's property, location, quantity and money value thereof.
(2) Names and addresses of creditors of each class.
(3) Names and addresses of the stockholders of each class.

Secured Claim: Where a claim is secured by a lien, the code limits that secured claim to the value of the property less any higher priority liens.

Secured Creditor: A creditor holding a lien (secured claim) on property.

Security: A guarantee, as applied to an obligation, such as a mortgage, given a debtor to insure the payment or performance of its debt.

Security Agreement: An agreement whereby assets of a buyer, or borrower, are pledged as security for a loan or extension of credit.

Security Interest: Any interest in property acquired by contract for the purpose of securing payment or performance of an obligation.

Setoff: A counter claim that a defendant has against a plaintiff and which arises out of a different transaction.

Settlement: This is when the debtor offers a sum of money or products to settle a debt.

Sheriff: A county officer charged with the execution and enforcement of civil and criminal law. Duties may include serving various court orders and conducting court sales to satisfy judgments.

Skip: This is when the debtor leaves the area in which he incurred the debt and cannot be located.

Skip Tracing: A service an attorney uses in order to locate the debtor.

Slander: Spoken words which tend to damage the character or reputation of another.

Soldier's And Sailor's Relief Act: A federal Act, also passed by various states, under which the right to bring suit against a person is suspended during the period such a person is in the military service or for a period thereafter.

Solvent: An individual, partnership or corporation able to pay its legal debts as they become due (where assets exceed liabilities).

Status Report: This is a regular report that the attorney must write to the forwarder informing him of each and every thing that is being done to collect the file.

Statute: A legislative enactment.

Statute Of Limitations: A law which limits the length of time within which a suit must be commenced before the right to sue is lost.

Statutory Lien: A lien arising under a statute, not including a security interest or judicial lien.

Stay: To hold in abeyance. An order of the court to postpone a legal proceeding.

Stipulation: (1) An agreement made by opposing attorneys incidental to a court action. (2) To specify the terms of an agreement.

Subordination: An arrangement by which certain claims may not be paid before others.

Subpoena: A writ or order directed to a person and requiring his or her attendance at a particular time and place, to testify as a witness.

Subpoena Duces Tecum: An order not only for the purpose of compelling a witness to appear in court, but also requiring the witness to bring books and records which may be in his or her possession and which may tend to disclose information or explain the subject matter of the trial.

Subrogation: The substitution of one person in place of a creditor whose rights he acquires.

Suit Fee: A suit fee is a fee payable to the receiver in addition to the commission, for legal services rendered by the receiver for the creditor involving court action in connection with the prosecution of a commercial claim. These monies may be made, in whole or part, contingent.

Suit Filed: This is when an attorney files a law suit in the local court to have the court rule on the validity of the claim.

Suit Requirements: An attorney sends suit requirements to the forwarder when he feels a law suit should be started. This consists of court costs (filing fee), a suit fee and his commission percentage.

Summary Judgment: A remedy for having the court decide a case on affidavits and pleadings without the necessity of a full trial; usually granted when no trialable issue is presented and the outcome is clear.

Summons: A writ or notice requiring a person to appear before a court to answer a complaint by a certain date.

Supplementary Proceedings (Sup. Pro.): A statutory action requiring the judgment debtor to appear for examination by the creditor to discover property (assets) against which action can be taken to enforce collection of the judgment. A procedure requiring the debtor to answer, under oath, questions put by the creditor's attorney.

Surety: A person who agrees to be liable for the debt or contractual obligations of another.

Tenancy In Common: Two or more persons who hold land or other property in common.

Third Party Claim: A demand made by a person (not a party to an action) for delivery or possession of personal property, title to which is claimed by the third party.

Trade Acceptance: A draft or bill of exchange drawn by the seller on his customer for goods purchased and accepted by the buyer.

Trade Discount: An allowance or deduction a buyer may make from the listed price of the goods purchased.

Trial Date: Once the law suit is filed, the court sets a trial date when the matter will be heard by a judge.

Trustee: One who is entrusted with property for the benefit of another (or creditors).

Turnover Proceeding: A summary proceeding authorized under the provisions of the Bankruptcy Act requiring a bankrupt to turn over property to a receiver or trustee for administration.

Unearned Discount: A cash discount taken after the discount period has expired.

Unsecured Claim: A pre-petition claim which is not a priority claim and is not a secured claim is an unsecured claim.

Unsecured Creditor: A creditor without a lien. Unsecured claims may or may not have priority.

Untertaking: Legally refers to a bond or other security which must, by law, be furnished before certain legal steps may be taken.

Underwriter: One who joins with others in entering into a policy of insurance as the insurer.

Uniform Commercial Code (U.C.C.): Laws governing commercial transactions updated, standardized and approved by the National Conference Of Commissioners On Uniform State Laws. These laws have been adopted by all states except Louisiana and are under continued study for review and recommended changes.

Usury: Charging an illegal rate of interest; unlawful interest in excess of the rate established by law.

Vendor: A supplier who offers goods or services for sale.

Venue: The place where an action is tried, generally based on locality or judicial district, in which an injury occurred or a material fact happened, or where defendant resides.

Verdict: The formal decision or finding of a judge or jury.

Verification: (1) An affidavit, under oath, swearing that a writing is true. (2) An accounting term confirming bookkeeping entries.

Waiver: The intentional or voluntary yielding or relinquishment of a known legal claim, right or privilege.

Warrant: (1) To assure that certain facts are true. (2) A writ issued by a judge or competent authority, directing a Sheriff or officer to make an arrest or search.

Writ: An order issued from a court in the name of the sovereign or state directing the person named to comply with the directions contained therein.

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