Legal Strategies to Recover Freight Payments

Unpaid freight bills can have a significant impact on your company's cash flow and overall financial health. Consistent non-payment can put carriers in a difficult position, despite the fact that payment delays are common. You might need to look into legal options if you've exhausted all of the informal means of collecting your money. What should you know in order to protect your business and recover the money owed, and what legal options are available to you when a freight broker or shipper refuses to pay, in this guide.

1. Review your freight contract

Reviewing the freight contract you have with the broker or shipper is the first step before taking legal action. The contract will list the terms, conditions, and remedies you may have in the event that payment is delayed or withheld. Some contracts contain dispute resolution clauses that specify how disputes involving payments must be resolved, such as through arbitration or mediation.

Important Remarks to Make:

• Payment schedules and deadlines

• Interest or penalties for late payments

• Arbitration, mediation, or litigation clauses for disputes resolution.

By understanding your contract, you can find out if the other party broke the terms of it, giving you a solid foundation for any legal action.



2.... File a claim for freight.

In some circumstances, the logical next step may be to file a formal freight claim. To do this, you must notify the broker or shipper in writing that you are requesting payment for the services or goods you have delivered. A freight claim is a formal request for compensation for non-payment, and it can also be used if the dispute involves lost or damaged goods or other transport-related disputes.

How to File a Freight Claim:

• Provide the broker/shipper with written notification, including the unpaid amount, the invoice, the delivery confirmation, and any additional documentation.

• Be sure to submit your claim within the deadlines set forth in the contract or industry rules.

• Follow up with regular communication to make sure your claim is being processed.

3. Loan the Surety Bond of the Broker

According to the Federal Motor Carrier Safety Administration( FMCSA), freight brokers are required to carry a surety bond or trust fund worth at least$ 75, 000. In the event that the broker fails to fulfill its financial obligations, this bond exists to protect carriers and shippers. One of the best ways to recover unpaid freight bills is when a freight broker refuses to pay you for their surety bond.

How to File a Claim for Surety Bond:

• Gather pertinent paperwork, including your broker's contract with you, proof of delivery, and the unpaid invoice.

• Get in touch with the bonding company that holds the broker's surety bond; this information should be provided by the broker or made available via FMCSA.

• Send the necessary paperwork to the bonding company in order to file your claim.

The bond company will pay you for the unpaid amount, up to the bond's maximum, if your claim is true.

4. Bring the case to the Small Claims Court.

You might want to think about bringing a case in small claims court for smaller unpaid amounts. When the amount owed is within the court's limit, which typically ranges from$ 5, 000 to$ 10, 000, depending on the state, this is a relatively low-cost option for recovering freight bills.

How to File a Case in a Small Claims Court

• Check the state's small claims court system to see if your claim qualifies.

• Create documentation, such as the contract, the unpaid invoices, and communications with the broker or shipper.

• Attend the hearing where you present your case and file the claim with your neighborhood small claims court.

You will receive a judgment requiring the broker or shipper to pay the owed amount if the court rules in your favor. Although the collection of the money is simple, the court wo n't handle the actual collection of the money, so this process may not guarantee immediate payment.

5. Take into account hiring a collection agency

Employing a collections agency may be a wise choice if the broker or shipper continues to be unresponsive and the amount owed is substantial. Collections agencies have a history of recovering unpaid debts, and they can handle the process of contacting the debtor and bargaining terms with you. Although you'll have to pay the agency a portion of the recovered amount, this can be a successful method of resolving the problem without going to court.

Working with a Collections Agency:

• Select a company with expertise in the transportation or freight sector.

• Provide them with all Freight Logic LLC the necessary paperwork, such as your contract with the debtor and unpaid invoices.

• Agree on the collection procedure and bargain the fee (typically a percentage of the recovered funds).

6. File a lawsuit against a breach of contract

You might need to file a lawsuit for contract breach if you want to pay more money or if all other attempts failed. Although this legal process is more formal and time-consuming, it may be required if the broker or shipper is declining to pay significant sums of money. This lawsuit may be handled in federal court or civil court depending on the court's jurisdiction and the amount owed.

How to File a Breach of Contract Lawsuit

• Get in touch with a lawyer who specializes in contract or transportation law to go over your case and assess your chances of success.

• Prepare all forms of documentation, including contracts, unpaid invoices, delivery documentation, and communication records.

• Begin the legal process by bringing the lawsuit to the appropriate court and going through a trial, discovery, or mediation if necessary.

Legal action may be expensive, but it might be the only option for recovering significant unpaid bills.

7.... Report the shipper or broker to the regulatory bodies

You can report the non-payment to regulatory bodies, such as the FMCSA, in addition to taking legal action. This may not result in immediate payment, but it may lead to the broker's license being suspended or revoked, which could prevent them from engaging in similar practices with other companies.

How to File a Complaint with the FMCSA:

Visit the FMCSA's National Consumer Complaints Database.

• Provide a complaint describing the broker's failure to pay and any relevant supporting documentation.

• Follow-up to determine the status of your complaint.

By contacting the broker, you help keep them accountable and stop non-payment problems for other carriers in the future.

8. Prevent upcoming non-payment issues.

Once the current issue has been resolved, it's crucial to take action to avoid additional non-payment issues. Implementing best practices for arranging payment terms and vetting brokers can lower your chance of dealing with unreliable clients.

Best Techniques for Preventing Non-Payment:

Before accepting new loads, conduct credit checks on brokers or shippers.

• To ensure faster payments, use freight payment services or factoring companies.

• Establish clear payment terms, fines for late payments, and dispute resolution procedures for contracts.

You can lessen the chance of having to deal with unpaid freight bills by managing your relationships with brokers and shippers.

What is the conclusion?

Legal action may be required to recover the money owed to you when faced with unpaid freight bills. Knowing your options is essential to protecting your business, whether you choose to file a claim against a surety bond, go to small claims court, hire a collection agency, or file a lawsuit. Always go over your agreements carefully, keep track of all transactions, and follow the appropriate procedures to quickly recover payment. You can protect your business from upcoming non-payment issues by taking the appropriate legal action and putting preventive measures in place.