Pennsylvania Commercial Debt Collection Laws Explained

Companies and businesses with non-paying customers should take pro-active steps to compel payment.  Reducing accounts receivables and eliminating payment defaults increases a company’s cash flow and overall financial health.  Companies should hire a debt collection lawyer to assist with debt collections.  Debt collection lawyers can advise companies on Pennsylvania commercial debt collection laws and implement a successful debt collection strategy.


Pennsylvania commercial debt collection laws serve as the basis for court action.  Breach of contract is the primary debt collection law that is alleged in most lawsuits against non-paying customers.  Unjust enrichment is another cause of action that should be considered.  The cause of action of unjust enrichment arises where one party has conferred a benefit on another party, the other party appreciated and accepted the benefit under the circumstances and retained the benefit without payment for value.  Unjust enrichment is usually alleged when there is no contract between the parties.

There are other commercial debt collection laws that may apply depending on the industry.  For example, The Pennsylvania Contractor and Subcontractor Payment Act is intended to give contractors and subcontractors in Pennsylvania additional remedies against individuals or companies who fail to pay for services rendered.  The Pennsylvania Mechanic’s Lien Law is another Pennsylvania law that allows contractors or subcontractors to place a pre-judgment lien on real property for the value of services and costs related to improvements to the property.   


In a Pennsylvania breach of contract action, the statute of limitations generally requires that a court action be commenced no later than four (4) years from the date of the alleged breach.  Causes of action for unjust enrichment have the same four (4) year limitation period.  Other causes of action, such as the Pennsylvania Mechanic’s Lien Law, have other restrictive time constraints, so a consultation with a debt collection lawyer early in the process is advised.  In any event, businesses should consider legal action well before the end of a limitation period.  Accounts that are 60 to 90 days past due should be given immediate legal attention.


In Pennsylvania, when one party violates the terms of a contract, the other party can sue to enforce the contract.  To prove a claim for breach of contract, the aggrieved party must 1) prove the existence of a valid, enforceable contract, 2) the other party breached a duty imposed by the contract, 3) the aggrieved party performed its duties under the contract, and 4) the aggrieved party suffered damages as a result of the other party’s breach.  The purpose of a claim for damages for breach of contract is to put the aggrieved party in the position it would have been in but for the breach.  In other words, damages can be awarded to compensate the plaintiff for loss suffered due to the breach.

For a contract to be valid and enforceable, there must be consideration.  Consideration (quid pro quo) in the legal context means both sides must confer a legal right and obtain a benefit which the parties actually desire.  If there is no consideration, then the agreement is not a valid and enforceable contract.  

Generally, a contract can be oral or written.  Some contracts are required to be in writing in order to be enforceable.  For example, purchases of real estate must be in writing and a contract for the price of $500 or more for the sale of goods must also be in writing (there are certain exceptions to this rule as set forth in Title 13 of the Pennsylvania statutes).

pennsylvania commercial debt collection laws


  • Attorney’s Fees and Costs.  Pennsylvania law does not automatically allow for the recovery of attorney’s fees and court costs for a breach of contract or unjust enrichment claim.  In other words, each party involved in litigation must pay its own attorney’s fees.  This is known as the “American Rule”.  There are exceptions to the American Rule.  A contract can expressly specify that a party who breaches the contract must pay the other party’s attorney’s fees and costs if the party must sue to enforce the contract.  For this reason, companies should use a comprehensive, written contract in its course of dealings with its customers that includes this language in order to recoup the expenses related to a debt collection activity.
  • Venue and Jurisdiction.  State and Federal laws could impact where a lawsuit must be filed.  If both parties to a contract are located in Pennsylvania, the decision is easy – the lawsuit is usually initiated in the county where the debtor is located.  However, if the debtor is located outside of Pennsylvania, then the decision where to bring a civil action may be more difficult.  In some instances, laws may force the company to initiate a lawsuit in the debtor’s home state.  The company trying to collect the debt could be at a disadvantage in terms of costs, travel, judgment enforcement, etc.  To avoid this dilemma, businesses should consider a forum selection clause in its contracts.  A forum selection clause is an enforceable contract provision that governs venue and jurisdiction for future legal disputes.  Simply put, a forum selection clause specifies the location in which a dispute will be resolved.  If a company located in Philadelphia, PA contracts with a business in Texas who defaults on payment obligation, a forum selection clause in the contract might clearly provide that a lawsuit must be initiated in Philadelphia, PA which is the company’s home state.


  • Judgment Lien.  In Pennsylvania, a judgment lien can be attached to the debtor’s real estate (house, land or condo).  The lien is attached when the judgment is recorded within the Pennsylvania county court where the debtor owns the real estate.  The judgment lien will remain on the property for five (5) years, but it can be extended with the filing of a Writ of Revival.  Judgements can be transferred to another county or a judgment can be transferred from another state.  
  • Writ of Execution.  To satisfy a judgment, debt collection attorneys can file and serve a Writ of Execution.  A Writ of Execution authorizes the sheriff’s office to take certain action to collect assets of the debtor to satisfy the judgment.  These assets may include funds in the debtor’s bank accounts, real estate, and other tangible personal property.
  • Judgment Execution.  Unless a debt is discharged by a bankruptcy court, execution upon a judgment may be issued against personal property with twenty (20) years of the entry of the judgment.


Since 2001, The Martin Law Firm, P.C. has successfully obtained and enforced money judgments throughout the Commonwealth of Pennsylvania.  We represent a large array of businesses for the collection of commercial debts.  We handle matters on an hourly basis or contingency fee basis, depending on the situation.  Call us today at 215-646-3980 to discuss your debt collection matter.

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