How to Collect a Debt From a Debtor
Collecting money from debtors isn't always a simple process. Even in a favorable economy, there are some debtors that need a nudge toward repayment. During recessions or economic downturns, creditors have a more complicated and challenging task extracting well-deserved compensation. Even though collecting a debt can be frustrating, it's a lot easier when you practice proper and lawful techniques. Legalities have to be followed, as both the creditor and the debtor have certain rights. Knowing the ethics and correct business practices can make collecting a debt far more likely, as well as saving you added aggravation.
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Instructions
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Be well informed and prepared before contacting the debtor. Have paperwork, records of billing, service contracts and any records of earlier conversations regarding the debt handy. Spend time reviewing these prior to any attempt to collect a debt.
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Consider how to make contact with the debtor. If this is your first attempt, you may want to contact them by phone. Some debtors will be more receptive to a brief and courteous conversation than a letter. While speaking to the debtor, keep your voice professional and polite. Do not lose your temper, threaten or harass the debtor. Stay matter-of-fact in making your monetary request. Give a time frame and stipulations, as well as legal actions you may pursue if payment is not provided promptly. Keep a log of your conversation, including date, time and outcome. Follow with a certified letter stating any agreement, expectations or outcome of the discussion. Make a copy for your files.
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Pursue other debt collection recourse if payment is not received or if your contact with the debtor is unsatisfactory. Most creditors find collection in the first three months is more successful. Therefore, do not linger in your collection tactics.
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Check with small claims court. States have variable ceilings on the amount permitted to be filed in small claims court. Investigate requirements with your local court house. Typically, the filing fee is nominal and you won't need an attorney to take your debtor to small claims court. However, you will need to provide documentation of the debt and attempts to collect. A judge will oversee the process in small claims court. Collection of debt may include garnishment of the debtor or court appointed payment arrangements.
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Look at other options, such as mediation or arbitration, for achieving an out of court settlement. Many small claims courts or Better Business Bureaus have resources to assist fair negotiations. Arbitration is a formal agreement with a trained professional whose final determination is binding. In mediation, it's up to both parties to reach an agreement with the support of a third party mediator. Fees for this vary, though the cost is cheaper than most legal proceedings.
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Get a collection agency involved. Consult with reputable agencies such as those who are members of the American Collectors Association for fees and procedures. If a debt is excessive or there are no other options for collection, you may want to consider a collection agency's help, though costs for their services can be extensive.
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Tips & Warnings
If all areas fail in achieving payment, report the debtor to a collection agency.
Consult an attorney if a significant amount is owed.
Never threaten bodily injury or injuy to a debtor's property.
