Although it is always better to use your own money for running your business or manage your expenses. Yet invariably you need to arrange extra amount to meet extra expenses due to expansion of business or venturing into a new business etc. Generally, people take extra amount as a loan from bank or some other financial institution putting you under debt.
The forms of debts can be your personal debts, corporate or government debts. Usually, personal debts are categorized as Secured debt, Unsecured Debt, Revolving Debt as well as Mortgages.
Debts may be stressful but are almost integral part of running businesses. As such there is no harm in taking loan till you keep on paying your re-payment installments on time. Failure in clearing your debt as committed by you can put you in trouble. This narrative driven blog explores the creditors option for debt collection.
For the collection of debt, the creditors have options like:
- Using creditor’s internal collector
This is precisely done by deputing an employee from creditor’s office staff who directly deals with the debtors. They do not involve anyone else i.e. a middleman for the collection
- Collection through debt recovery agency
When lender finds it difficult to collect the debt, a third party is hired by the lender i.e. debt recovery agency which is assigned to collect recovering the debt. In lieu of debt recovery, lender pays commission to the agency as fees or some decided percentage of collection.
All through the process the ownership of debt remains with the creditor. In many cases, the debt is sold to the debt collection agency after writing off the debt by original creditors and finishing their involvement.
- By appointing a law firm
In many unmanageable old and delinquent dent accounts, the creditors are constrained to seek legal support in recovering their debts and accordingly appoint a law firm for collection of debt.
Sending a communication through a law firm has been found to be better and more successful as it leaves a greater impression on mind of debtor and results in the increased possibility of recovery of debt.
However, debt collectors are permitted to contact or communicate with debtors through all available means such as phone, letters, and email or text message but without violating the norms laid by Fair Debt Collection Practices Act (FDCPA).
Which one to choose; Debt Collection agency or Collection Law Firm?
By and large, both debt collection agency and debt collection law firms are hired to pursue the recovery of delayed or unpaid debts. Both are regulated by the Fair Debt Collection Practices Act (FDCPA) and are required to perform within framework of rules set in under the act.
However, their processes and manners employed for the collection of debt may differ for collecting or recovering debts.
When it comes to choosing between Debt Collection agency and Collection Law Firm, you must ponder over few important factors that include:
- Size of Debt
Usually, the specially trained agents of debt collection agencies can collect even smaller balances and pursue larger sums as well. Whereas, debt collection law firms employ specifically qualified law specialists for pursuing the collection of mostly old and unmanageable debt accounts involving larger sum.
- Charges for collection
Debt collection agencies usually charge fees in the form of commission based on the response to their recovery. The Debt collection law firms often charge a set fee usually based on the size of the debt. The fees charged for collection of debt is also influenced by the age of the debt account and the debt balance.
- Speed for clearing the debt
Debt collection agency may continue making efforts for collection of debt accounts for months or even years. Their efforts for recovery of debts often yield low and unsatisfactory results.
On the other hand, debt collection law firms can quickly sue the debtors for the unpaid debt which often results in faster collection of debt than a debt collection agency.
- Complexity of debt
For more complex cases where debt collector or debt collection agency that has purchased the debt from the original creditor and other personal loans are not easy to recover are usually turned toward debt collection law firms. These debt collection law firms can be more effective in collecting the debt from delinquent borrowers.
Why prefer Debt Collection Law Firms for debt collection?
Both, debt collection agency and debt collection law firms are governed by Fair Debt Collection Practices Act (FDCPA) and accordingly, both are legal entities.
Yet often people have shown preference for debt collection law firms as they are:
- Better equipped with legal knowledge
- Able to resolve dispute while maintain good relations with debtors
- Better option of suing the client
- Capable of Navigating you through lawsuit process
- Taken more seriously by debt defaulters
- In position to improve your cash flow
Above all, Debt collection law firms are trained attorneys who can beat debtors at their own game and without issuing threats or using harsh language they can force errant debtor to pay the balance to clear the debt.