When a business hires a commercial collection agency, it’s up to the collection agency to recover the debt owed to the creditor. It’s important to know when to pick the best time to hire a collection agency when dealing with your customer’s debt. That will be a factor on when the business gets the money owed to them. Another factor is if the debtor business goes bankrupt or has ceased operations. Can a commercial collection agency collect on money owed by a defunct business?

Is the Business Actually Defunct?

If a business was organized as a corporation or limited liability company (LLC), only the business entity is liable for the debt or outstanding invoices. As a defunct business, there will be no assets remaining to generate cash to pay the creditors. If a business claims to be defunct, an important step is to determine the validity of its claim.

Sometimes it can be difficult to determine since the company’s website and phone services might still be in use regardless of the company’s health status. Some creditor businesses do work themselves to determine a defunct debtor’s validity; a more dependable method is to use a commercial collection agency. That way creditor companies can focus on their business operations and keeping other creditors on successful payment plans. A commercial collection agency has the skills and resources to accomplish research and work to prove a company is defunct.

How Did This Happen?

How is it possible that a debtor company is defunct and not able to pay the debt it owes a creditor? In most cases, unpaid invoices between a debtor and creditor are very old before they’ve been sent to a commercial collection agency. Some creditor businesses wait until to hire a commercial collection agency until the last moment, which usually ends with the creditor not being able to even pay off its debt. That’s why it’s very important to hire a commercial collection agency sooner so that the creditor doesn’t waste their time in the process. This is the best option to avoid not getting paid by a defunct business.