So, you have a customer who has an overdue account and is not making an effort to pay. You have taken a number of steps to recover the funds yourself such as sending a reminder email, making phone calls and sending overdue payment letters. Yet still you have not received payment or worse you cannot contact the debtor at all. When this happens, you have a few options moving forward.
As the name suggests, debt collection companies specialize
in recovering unpaid debts. Because their entire business is based around this
service they have proven systems in place and are very efficient at recovering
Debt collectors will often employ many of the same techniques you used yourself to initially follow-up the debtor such as sending letters of demand and making phone calls.
They often have a much better success rate because:
This is their
take communication from a debt collector much more seriously, as they have the
ability to register these unpaid debts against the debtors’ credit history,
along with other more serious courses of action.
Most debt collectors also offer very competitive rates. You should always choose a debt collection agency that offers a “ No Recovery, No Charge
” service so you only ever pay when they recover the money owed to you.
Hiring a lawyer who specializes in debt recovery is a wise choice in certain cases. But this is only recommended if you fully intend to take the debtor to court if they do not respond to your lawyer’s initial efforts to recover the funds. So, you generally wouldn’t hire a lawyer to recover a small debt.
The other benefit of hiring a specialist lawyer to collect your debts is that the letters they send will be written on legal stationary and the recipient will take their threats of legal action much more seriously. Generally, businesses will only hire a lawyer to recover higher amounts of debt because their fees can quickly add up and many do not offer a " No Recovery, No Fee"
To help you get a handle on how debt-collectors work, here are some of the differences between debt-collectors and lawyers from Michael Coleman, author of “The Collection Management Handbook."
Get paid when they collect money for you. And only if they collect.
Get paid as they go (and sometimes in advance). You pay them, no matter what the results.
Will usually negotiate hard with the debtor to try to get a settlement before they start legal action.
Get stuck right into the legal process. Little negotiation, if any.
May work fast, but for some reason rarely give that impression.
Will knock on doors, phone at odd hours, and try anything legal to collect your money.
The only pressure they can use is to pursue the matter through the courts.
Keep pushing their lawyer hard, if it comes to legal action.
May seem sluggish.
Pay a lot of attention to whether it's possible to collect the debt. Will usually check to see if the debtor has assets.
May go ahead without worrying about such things. At best, will raise the point and leave it to you to decide.
Can explain to you what's happening, in plain language.
Some will explain clearly. Others may not.
If they need to use a lawyer, you have to pay for the lawyer, as well as pay a commission to the debt-collection agency.
Lawyers fees only.
Can find missing debtors.
Locating debtors isn't their business.
Keenly interested in collecting debts, and in all aspects of it.
Rarely very interested.
So how do you choose between a debt collector and a lawyer? Well the great news is when you partner with Collectrite Collections, you don’t have to.
You can now have the best of both worlds by hiring a debt collection agency that has access to in-house paralegals who specialize in debt recovery.
Not only do you get the benefit of a dedicated debt collection company that offers:
You also have access to experienced paralegals who specialize in debt recovery and can…