Source: https://creditorsrights101.com/category/invoice-collection/
Timestamp: 2019-04-19 01:21:10+00:00

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We’ve talked about this before: Tennessee is a great, creditor-friendly state, but, if you want to recover your attorney’s fees in Tennessee, you’d better have some very specific language in your contract.
The Tennessee Court of Appeals filed an opinion last week as a reminder, at Nyrstar Tennessee Mines-Strawberry Plains, LLC v. Claiborne Hauing, LLC, Tenn. Ct. Apps, No. E2017-00155-COA-R3-CV.
By my read, “all costs and expenses,” along with “including legal expenses,” should be good enough.
So, if you want to recover attorney’s fees in Tennessee, you’d better say exactly that in your contract–that the prevailing party shall be entitled to recover its attorney’s fees.
I talk a lot about liens as a good way for a creditor to get paid. In state courts and bankruptcy courts, there often are two lines formed: one for those with liens; and the other for those without liens. And you can guess which one leads to the money.
Under Tennessee statutes, there are liens for all kinds of people: mechanics, artisans; dentists; jewelers; shoe repairers; cotton ginners; lithographers; baggage claim folks…just to name a few.
But let’s talk about attorney liens today.
This lien extends to two types of property. The first is a “retaining lien,” which gives the attorney the right to retain a client’s books, papers, or money coming into his possession during the matter until the client pays. The second is a “charging lien,” which is a lien for payment of fees against the judgment or recovery obtained in a case. For a good review of this, see Starks v. Browning, 20 S.W.3d 645, 650 (Tenn. Ct. App. 1999).
There’s some old caselaw out there that suggests that the attorney must have the lien noted in the Judgment to be valid. The Starks case above (involving the venerable Nashville lawyer, Bart Durham) says that requirement is not in the statute and is just an odd creation from old caselaw.
But, I say that it’s a good practice to note the attorney lien any– and every-where (in judgments, in notices filed with the Court, notices recorded in the Register’s Office), but it’s not legally required.
The statutes above don’t cover all situations where an attorney might have a lien; in fact, other specific statutes, like worker’s compensation matters, may have their own special rules. Additionally, nothing would stop a collection minded lawyer from obtaining a consensual lien as part of his or her client engagement documents, particularly where client resources may eventually be scarce.
Long story short, the attorney lien statutes are probably narrower than you thought they were, granting a lien generally only the lawsuit filed by the attorney. Any other, broader liens to secure repayment must be granted or taken under other statutes (judgment liens, consensual liens).
If the creditor accepts that check, the borrower’s argument goes, the creditor also accepts the payment as a settlement…that the account was paid in full. This overlooks (or counts on) the fact that most big creditors process payments by machine or without watching for sneaky notes in the Memo section.
Fortunately, however, the general rule in Tennessee is that a note on a check may be an indication that the account was settled, but it isn’t the only and final proof of settlement. On this exact issue, the Tennessee Supreme Court has said “Something more is required.” Quality Care Nursing Servs., Inc. v. Coleman, 728 S.W.2d 1, 4 (Tenn. 1987).
Generally, Tennessee courts will look at whether there was any other evidence of a payment dispute and “meeting of the minds” that this payment was tendered as a settlement and a proposal to resolve the disputed account. Was there a cover letter explaining a dispute and that acceptance of the payment was truly a settlement of the debt?
So, what do you do if you are faced with a “Paid in Full” check? Well, as a initial matter, be careful.
If you receive one and you notice it, you may well be opening yourself up to an “accord and satisfaction” defense under Tennessee law. The best practice would be to refuse any such payment and return it to the borrower, with a demand that the check be replaced.
The risk in accepting the payment is clear. One court has noted ” a creditor’s action of cashing the check speaks louder than its words, have held that by accepting and cashing a check marked ‘paid in full,’ a creditor has agreed to accept the amount of the check as full payment of a disputed amount.” Ideal Stencil Mach. Co. v. Can-Do, Inc., 85-81-II, 1985 WL 4041 (Tenn. Ct. App. Dec. 4, 1985).
A common query is whether confessions of judgments are valid in Tennessee. Frankly, after nearly 15 years of practice in Tennessee, I’ve never dealt with a confession of judgment, so, as a practical matter, I don’t think they are valid in Tennessee. But, recently, I actually came across the answer.
As background, a confession of judgment is a contract provision (or a stand-alone contract) in which one party agrees on the front-end of a transaction to let the other party enter a judgment against him if the deal goes bad. You agree, in advance and before any default or dispute arises, that the other party can get a judgment, even without a lawsuit pending and despite any legitimate defenses that may ultimately exist.
You can imagine why a creditor would include such a provision in their contracts.
Any power of attorney or authority to confess judgment which is given before an action is instituted and before the service of process in such action, is declared void; and any judgment based on such power of attorney or authority is likewise declared void.
This section shall not affect any power of attorney or authority given after an action is instituted and after the service of process in such action.
So, even though Confessions of Judgment are not valid in Tennessee at the time of the contract, such provisions will be enforceable after the filing of the lawsuit, such as in a forbearance or settlement agreement.
Sworn Accounts Under Tennessee Law: Why, When, and How?
Sometimes, a creditor’s lawyer will file an action against a borrower as a “sworn account.” These are basically lawsuits on steroids, but they aren’t as common as you’d expect.
This device is allowed by Tenn. Code Ann. § 24-5-107, titled “Sworn accounts; denials,” which states that an action that is filed “with the affidavit of the plaintiff or its agent to its correctness…is conclusive against the party sought to be charged, unless that party on oath denies the account…” There’s an exception under § 24-5-107(b), that allows a court to accept an oral denial of the sworn account.
The reason behind sworn accounts is to make the debt collection process easier, especially on debts where there is no dispute. It shifts the burden of denial to the defending party.
But, when a sworn denial is filed, the burden shifts back to the plaintiff to support his claims with actual evidence at the trial, i.e. the sworn account becomes a moot point.
So, when and why would you proceed on a sworn account?
Primarily, I file them when I’m before courts that don’t have a “free continuance” Local Rule, like Davidson County. That way, if I show up and have my witness with me at court, I’ve got some proof of my claims with a sworn account.
Some lawyers file them hoping to set the procedural trap, hoping the other side will neglect to file a “Sworn” Answer, but that seems sneaky (but, it’s supported by the caselaw).
Other than the extra step involved (preparing and filing an Affidavit), there’s not any downside to proceeding with a Sworn Account.
Is it Bankruptcy Fraud to Dismiss a Case Where Your Plan is to Incur More Debt and then Refile?
I’ve done collections law too long to think of it in moral terms. I don’t think a person who doesn’t pay his bills is necessarily “bad” (though some are). Sometimes, I think the creditor is equally at fault for lending money or providing services to these poor folks.
But, I recently saw a Bankruptcy pleading that stopped me dead in my tracks.
It was a Motion to Voluntarily Dismiss Chapter 7 Bankruptcy Case, which is a filing a debtor makes to stop his bankruptcy case. People want out of bankruptcy for a number of reasons, but this one took the cake.
In it, the Debtor asked the United States Bankruptcy Court to dismiss his Chapter 7 because he wanted to, basically, wait a few more months to run up some more medical bills. Then, after that, he’d re-file his case and discharge those new debts.
1. The Debtor filed a Chapter 7 bankruptcy on November 6, 2012.
2. The Debtor’s meeting of creditors is set for December 12, 2012.
3. Since the filing of this case, the Debtor has incurred extensive medical care and expects to have a surgery and additional medical care in the coming months.
4. The Debtor, therefore, desires this chapter 7 proceeding be voluntarily dismissed.
Without a doubt, that’s a tough situation for the Debtor, facing medical bills that he can’t pay.
But, what about that doctor or hospital who will be asked to provide those services? This is as close as “pre-meditated” default and bankruptcy as it gets.
The Bankruptcy Code allows a creditor to oppose discharge for some debts that are incurred immediately before Bankruptcy, including those incurred via fraud or bad intent. But, to do that, the creditor has to file a lawsuit to claim that the debt shouldn’t be discharged and that’s a burdensome, costly process.
In case you’re wondering, the Motion was granted.
Long story short, some doctor is going to provide goods and services in the near future that certainly will never be paid. Yikes.

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