United States of America collection profile



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Complexity of collecting debt:

Notable High Very High Severe

Executive summary

  • The payment culture of domestic companies is becoming increasingly uncertain and, in the absence of a harmonized framework on late payments, payment terms remain a mere contractual issue and the average DSO tends to be high.
  • The court system is complicated by a federal structure in which protection mechanisms are not recognized and where no simplified proceedings are available to settle the simplest files. As a result, significant delays and costs must be expected whilst enforcement may be difficult.
  • When the debtor becomes insolvent, collecting debt becomes a complex task. First, the bankruptcy system remains pro-debtor and, although it is often said that making a company insolvent is a significant way to obtain payment, in practice bankruptcy reorganization is resource-draining. In addition, most states protect the debtors' personal assets and there is therefore a possibility for a corporate bankruptcy to be listed as “no asset” cases. This means that after liquidating the debts, the likelihood of any distribution to creditors is zero.
General Information GENERAL INFORMATION arrow-transparent
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
General Information 


Days Sales Outstanding (DSO)

Payments in the U.S. normally take place within 28 days on average (2015 figures) but delays of 5 - 10 days tend to be increasingly imposed by large companies. In some instances, such as for substantial sales or special customers, terms can extend up to 90 or even 120 days. Some businesses have begun to take a more ‘relaxed’ approach to invoices. It is now not uncommon to hear of businesses that regularly extend terms without further discussion with their suppliers, and this is undoubtedly a worrying trend. Businesses are less inclined to the concept that invoices are ‘due now’, not appreciating that 30-day terms or indeed any period of credit is a privilege not a right. Perhaps not surprisingly it is the larger companies that are much more likely to take advantage of their suppliers’ good nature and their dependence on larger customers for trade.​


Late payment interest

Payment terms are not regulated by law and may be freely be agreed upon as part of a contractual relationship. Late payment interest may be charged to the debtor. Interest may be charged up to the legal rate of interest allowed by the state in which the debtor resides. If no such agreement is available, the creditor can charge the legal rate of interest allowed by law in that state.

One cannot legally charge collection costs without a prior agreement signed by the debtor authorizing such charges. Even if such an agreement exists, the courts do not always enforce it; therefore, it is best used as a negotiating tool when trying to collect a debt.

collection practice 


Orchestrated negotiation first

Although U.S. courts are reliable, dealing with disputes is a time-consuming and expensive process. Hence, amicable settlement opportunities should always be considered as a serious alternative to formal legal proceedings. Before starting legal proceedings against a debtor, in addition, assessing its assets is important as it allows verifying whether the company is still in activity and whether recovery chances are at best. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it indeed becomes impossible to enforce a debt (see below). Legal dunning then ought to start with a registered Demand Letter recalling the debtor its obligation to pay the principal together with late payment interest. In practice, the courts however often require that the parties to a dispute engage in alternative dispute resolution mechanisms in order to reduce their caseload. As a result, a majority of disputes are settled amicably and never reach the trial stage.

Court Proceeding 


The United States has a federal structure consisting of fifty states and one federal district (Washington, D.C.), each characterized by specific rules and specific courts. Disputes are normally settled at the State level through State and County Courts of general jurisdiction, but federal District and Regional Courts would have exclusive jurisdiction over subject matters falling under the scope of application of federal law (international trade, federal claims) or when the dispute involves parties located in different states.

Provided that the debt is certain and undisputed, the creditor may first file an application for summary judgment. Having said this, whilst in theory obtaining a summary judgment ought to take nine months to a year, this is not always the case in practice. Often, the debtor's attorney would indeed ask for delays (six months to a year) so as to extend the date of the trial and to put their client in a better settlement negotiation position. Ordinary legal action usually commences when amicable collection attempts have failed. The creditor would file a claim with the court prior to serving summons to the debtor. The latter would then be given thirty days (in most jurisdictions) to bring a defence but, if not, obtaining a default judgment could nowadays take up to a year depending on the jurisdiction and the staffing available. As the U.S. relies on discovery in order to conduct legal proceedings, the parties are normally required to provide their arguments and evidence to the opponent prior to beginning the proceedings. The courts, at the state and federal levels alike, would normally award remedies in the form of damages, injunctions or specific performance. Punitive damages are available but remain rare in debt collection cases.

insolvency Proceeding 


The Uniform Commercial Code (§1-201) defines insolvent debtors as having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute, or as being unable to pay debts as they become due. Insolvency law in the U.S. used to be considered as being very favorable to the debtor until 2005, when the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) made several changes to the Bankruptcy Code. Chapter 11 proceedings, indeed, have been introduced (and eventually inspired numerous pieces of legislation throughout the world) as a means to develop a rescue culture susceptible of saving viable businesses from temporary economic turmoil. Despite the changes, the bankruptcy system however remains very pro-debtor and mostly rewards the administrators and attorneys that oversee the cases. In fact, it is often said that making a company insolvent is a significant way to obtain payment but in practice bankruptcy reorganization is resource-draining and only ought to be considered as the last resort after all alternatives have been exhausted.


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