Collecting unpaid loans or accounts that remain due can be challenging. It doesn’t matter if it’s an individual loan or a business-related one; you could be thinking, What should I take action on, and where should I go to recover the debt? If businesses and individuals have abandoned their efforts to collect on a debt, there are two options: a debt collection agency and a debt collection attorney.
What is a Debt Collection Agency?
A Debt collection agency is a company that is hired by creditors or lenders when individuals or companies fail to collect the debt themselves. Most collection agencies operate for creditors directly and attempt to collect it by collecting debts at an agreed-upon fee or percentage of what’s collected as their efforts pay out. Collection agencies deal with a variety of clients, debtors, and collection cases at the moment, since they typically are their first defense used by creditors to collect any unpaid debt or account. Methods used by collection agencies include:
- Reaching out to the debtor at their home address or place of employment
- Sending late payment notices through the U.S. Postal Service
- Reaching out to the debtor’s family members or associates to gather current contact details.
- Reporting delinquent or overdue accounts to credit bureaus
Debt collection agencies typically manage an extensive amount of consumer debts like credit card bill and medical or hospital bills or utility bills that are not paid. People who owe some hundred dollars or several thousand dollars ought to look into a debt collection agency because they’re equipped to manage a wide range of accounts. Their collection techniques are quite constrained.
Also read: Debt Collection Tactics: What Is Skip Tracing?
What is a Debt Collection Attorney?
A debt collection attorney is a lawyer who specializes in helping clients recover unpaid debts. Their role can vary depending on whether they represent a creditor (the person or company owed money) or a debtor (the person who owes money).
Debt collection attorneys will comply with the following steps
- Send formal demand letters to the debtor
- Start a lawsuit against the debtor
- Obtain a money judgment
- Enforce the money judgment
In enforcing the judgment, you have using the legal process to obtain information about the assets of the debtor, taking the assets, and utilizing these assets to pay obligations under the judgment. An outstanding money judgment in Pennsylvania may serve as a lien on property belonging to its debtor. The creditor must settle the outstanding debt before he can sell their property or refinance mortgage.
Debt collection attorneys can also draft a written settlement agreement outlining the terms both parties have agreed upon to settle the debt. For instance, if a debtor is looking to pay monthly installments, an attorney could create an agreement that does not just specify the terms of payment and conditions, but also includes additional important provisions, like interest, and recovery attorney’s fees in the case in the event of a default.
Debt collection attorneys charge either a percentage of the amount recovered or an hourly fee for their services. Payment arrangements are agreed upon in advance, and generally are based on the size of the debt, the financial strength of the debtor and the length of time that the debt was unpaid for.
Debt Collection Attorney Vs. Debt Collection Agency
Ethical Consideration
Recent investigations conducted by the FBI, the Federal Trade Commission, and the Consumer Financial Protection Bureau have discovered that debt collection agencies frequently engage in shady and illegal methods for collecting debt, such as using false identities to claim they are law enforcement agencies and making inappropriate threats against the person who is in debt. This type of behavior is prohibited by the Fair Debt Collection Practices Act and has resulted in the arrests of numerous debt collection agency representatives recently. You must do your due diligence before hiring a debt collection agency.
Debt collection attorneys are handle debt collection must adhere to a strict ethical standard. Attorneys are fiduciaries, meaning that they cannot act independently. Instead, they must always work in the best interests of their clients. Pennsylvania requires its attorneys to comply with the Rules of Professional Conduct, which is an established set of guidelines and regulations that they are expected to abide by – failure to do so could result in fines from licensing boards. Before hiring any debt collection attorney, discuss your legal needs with the attorney and evaluate their experience and overall behavior. You might not want a shrewd attorney or one who isn’t willing to go the extra mile.
Also read: Consistent Financial Reporting: Why It Matters for Business Success
Efficient Debt Collection Methods
Legal actions brought by lawyers can often be enough to force the creditor to “voluntarily” resolve the dispute with a full payment or a settlement. The majority of debtors do not have any valid reasons the reason why their debt hasn’t been paid, and they do not want to pay any legal fees, even if funds could be used to repay an outstanding debt, settlement negotiations or demand for judgment proceedings could be pursued accordingly. It is possible to say it is an effective approach, but every collection situation is different, and often it’s just the phone or an email to get the debtor to settle.
Final Remarks
Debt collection attorneys should be employed when collecting large debts; for smaller consumer debts, a debt collection agency might make more sense. Whatever route a debtor decides on, however, he or she should ensure the chosen collection agency or attorney has both experience in handling their cases and being dedicated enough to give yours all of the attention it requires.
Leave a comment