Construction companies frequently have a hard time collecting payment. Often, the challenge is simply due to the complex nature of the payment chain. But other times, it’s because a delinquent contractor can’t pay you — or worse, they don’t want to pay you. Your collection calls go to voicemail, they don’t reply to emails, and invoice reminders are returned undelivered. Tracking down a non-paying customer is half of the battle: Before you get them in court, you want to make sure that they have the assets available to pay you. Though rarely needed, skip tracing and asset searches are two important processes that credit and collection professionals use to find a delinquent customer and collect on an outstanding debt.
What is skip tracing?
Skip tracing is the process of tracking down a customer who has defaulted on a debt and is not responsive to typical collection actions. The term refers to tracking down or tracing the location of a person who has “skipped town” without paying.
Because the debtor (aka the “skip”) often doesn’t want to be found, the normal tools for locating them (phone calls, emails, etc.) aren’t typically useful. Skip tracers use a variety of tools, including public databases, court records, and property documents to locate the debtor so they can take them to court or enforce a judgment lien.
Who uses skip tracing?
Skip tracing is commonly performed by people in the legal profession, like lawyers, bounty hunters, and private investigators. But it is also helpful to companies that issue credit to customers in exchange for goods or services.
Because the construction industry is heavily reliant on credit, contractors and suppliers often use skip tracing tools to track down non-paying contractors or property owners in order to collect a debt, often in court.
The bottom line: Anyone can be a skip tracer with the right tools and information.
“Back in the day (before the internet), any information was gathered by tracking on foot from courthouse to courthouse, and searching records with endless phone calls,” Thea Dudley writes in her book, The Credit Overlord’s Guide to Credit & Collections.
“Searching took time and resources, not to mention cost — which was steep, since it was a manual, labor-intensive process. Now anyone with a computer, common sense, and some time can do it at a fraction of the cost,” Thea says. “You just have to know how to use it.”
Questions to answer before you start a trace
While skip tracing can be a helpful process in certain situations, it can also be time-consuming and expensive. Answer these questions to make sure skip tracing is the right course of action:
1. Is the debt amount worth the expense?
Even though there are free tools available, skip tracing comes with a cost. It may not be worth spending 40 hours tracking down a contractor who owes you $1,300.
Do a cost-benefit analysis to determine whether the outstanding amount is worth the time and effort it would take to track down a delinquent customer and get them into court.
2. Did you file a mechanics lien?
Contractors and suppliers typically have the right to file a mechanics lien if they aren’t paid on a project. Because a lien attaches to the property itself, it allows you to bypass the company or individual who failed to pay you and go straight to the top, to the property owner and/or lender. This is a much easier and less expensive process than trying to track down a debtor who doesn’t want to be found.
3. Does the debtor have enough assets to pay?
If the customer is bankrupt, you may need to write off the debt and move on. Of course, you may not know the answer to this question yet. Debtors who skip out on their obligations often have assets stashed away that they don’t want you to know about. We’ll talk more about doing an asset search in step 4 of the skip tracing process.
The skip tracing process
While conducting a skip trace can be quite involved, it doesn’t necessarily have to be. It could have been an honest mistake, and the customer may have moved or changed phone numbers without contacting you. It may only take a few hours to track them down, and you might not need to follow all of the steps below. But in case the delinquent customer is harder to locate, here is a step-by-step guide to the skip tracing process.
Step 1: Review existing information
The first step in skip tracing or an asset search is to review the information you already have on the customer. This will typically come from the credit application or work agreement.
Look for any information like banks, trade references, and landlords. The documents may also contain additional emails, addresses, and phone numbers that you can use to contact related parties who might know where to find them. Reach out to the customer’s sales representative to see if they have more current contact data — or an idea of what might be going on.
Step 2: Identify who you’re looking for
Are you trying to collect from a company or an individual? If a company, is it a sole proprietorship, a partnership, or an LLC? Who you can go after for the debt depends on the business entity and structure, and whether you have a personal guarantee.
Even if an individual is on the hook for the debt, tracking down their business partners and other company information can help you cast a wider net.
Step 3: Find business registration information
Look up any names you have (individuals and business names) in the Secretary of State’s business registration site. Remember, you’re not just looking for a person — you’re looking for the person or company who can pay the money you’re owed.
- Names of the officers and directors: Look for the decision makers and people of importance.
- Name of the registered agent: Every company has one, and they are responsible for legal documents
- All known addresses: Search for the headquarters as well as branch offices.
- Recent status: Is the corporation active or dissolved? If active, they have protection of the corporate veil. If the debt was incurred after dissolution, it becomes a sole proprietorship — and you can go after the individual.
- Date of incorporation: If the debt was incurred before the date of incorporation, it becomes a sole proprietorship, and therefore collectible from the individual. If the debt was incurred after the date of incorporation, and you have no personal guarantee, you can probably stop your search, as they have protection from the corporate veil, and you cannot pursue them personally.
“If the company has lots of names that seem similar, but just slightly different, you may have some corporate shell games going on,” Thea Dudley writes. “This makes it hard to know exactly who is holding the assets. If the names vary ever so slightly, they can tie you up in court for a long time without you ever getting next to an asset.”
Step 4: Conduct an asset search
For creditors, conducting an asset search is an important part of skip tracing. You can spend a lot of time and money tracking down a delinquent customer, but if they don’t have enough assets to pay off your debt, suing them in court may be a waste of time.
“Prior to the start of any lawsuit, you should take the time to check out what the person or business actually has,” says Thea. “Contrary to what I believed early on in my career, it does you no good to spend time and money pursuing someone only to find out they don’t have a pot or a window to throw it out of. Doing a pre-legal or post-judgment assessment can save time and money.”
Step 5: Search databases
The next step is searching online databases. If you haven’t done this before, you will be surprised at how much information you can find.
“People are in and out of databases all the time,” Thea writes. “Logging in and out of those databases, updating information, filling out subscriptions, entering sweepstakes, and of course, updating their social media — Facebook, LinkedIn, Twitter, Snapchat, and Instagram, to name a few. The data trail being left behind is like Hansel and Gretel dropping bread crumbs in the forest, if you have the patience and knowledge to know where and how to look.”
Collect as much financial and contact information you can find, including phone numbers, relatives, business associates, bank accounts, etc. And don’t forget to check social media profiles, too.
There are a number of database search websites, both free and paid. See the Tools & Resources section below for a list of helpful search sites.
Skip tracing tools & resources
Here’s an alphabetical list of websites and companies, both free and paid. Most of these resources comb public databases, court records, and even private databases to help you track down a skip.
Accurint
- www.accurint.com
- Subscription
- A LexisNexis product and favorite of law firms. They currently provide information on 37 billion public records, according to their site. It provides a series of products for searches on people, businesses, court records, criminal records, motor vehicles, divorces, marriages, property records, etc.
CourtHouseDirect.com
- http://courthousedirect.com
- Subscription
- They provide electronic document images of deeds, mortgages, IRS liens, assignments and any other real property or official record filings. All offer collection, litigation, and genealogy information. Not all states are covered, and you must be a member to pull data.
Fast People Search
- www.fastpeoplesearch.com
- Free
- Enter an individual’s name to find a record of all known addresses, phone numbers, and even relatives. I’ve found this to be very helpful in locating both addresses and current cell phone numbers for people that you are trying to skip trace.
First American DataTree
- www.datatree.com
- Subscription
- This land record database contains over 4.6 billion original documents with nationwide coverage. Their database provides current and historical data on property transactions and land records. Used extensively by mortgage brokers, realtors, and the banking industry. Reliable information on a site that is fairly easy to navigate.
Kroll Factual Data
- www.factualdata.com
- Subscription
- This site provides access to pull personal credit reports from all three personal credit reporting bureaus, along with a merge reports feature.
National Association of Counties
- www.naco.org
- Free
- You can use this site to locate a county or city, and then access the city or county’s records for taxes, county clerk, assessor’s office, and more.
National Association of Secretaries of State
- www.nass.org/busreg
- Free
- Great jumping-off point for searching corporate filings by state. Provides links to state agencies.
National Association of State Contractors Licensing Agencies
- www.nascla.org
- Free
- This site provides information on all states that currently require licensing in areas of construction. Provides the web addresses and links to the state agency.
PACER
- http://pacer.psc.uscourts.gov
- Subscription
- PACER (Public Access to Court Electronic Records) is the administrative office of the US Courts. It is the Federal Judiciary’s centralized registration, billing, and technical support center for the electronic database access to U.S. District, Bankruptcy, and Appellate court records. Record search for all courts that are online.
TLO
- www.tlo.com
- Subscription
- Part of TransUnion, this subscription database provides a great single source for individuals and businesses. Search for assets, reverse phone lookup, addresses, real property, and other data. It’s easy to use, and numerous formatting choices allow you to pick and choose how much or how little information you want to pull.
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