How to Recover Debts Owed

If debtors refuse to pay, you may have to take them to court.

Debt collection is a tricky venture. Between state regulations and the Fair Debt Collection Practices Act (FDCPA), there are a number of rules and regulations you must abide by when attempting to recover debts owed to you. There are, however, a few general ways to let the debtor know you mean business and, hopefully, see some of your money.

Instructions

1. Invoice the individual or business that owes you money. While this may seem obvious, many often skip this step. Make sure the invoice indicates the amount owed, when payment is due and the interest rate for late or unmade payments.

2. Call the debtor when you sent invoices over a 30-to-60-day period with no payment received. Attempt to negotiate a payment plan that not only helps them, but is beneficial to you as well, which typically means payments need to be at least 20 percent of the balance owed, especially if interest is accruing. Be sure to agree upon a payment-due date each month and inform the debtor, in a polite and professional manner, that failure to make payments timely and consistently may result in action through the courts.

3. Send a letter to the debtor if payment arrangements fail or you can’t make contact. Send it via certified mail with a return receipt for proof the debtor received it in order to proceed with future legal action. According to Section 809 of the Fair Debt Collection Practices Act, this letter must include the amount of money due and the name of the original creditor, must give the debtor 30 days to argue against or request validation for the debt in writing, and must inform the debtor that you will provide validation of the debt upon such request.

4. File a lawsuit against the debtor 30 or more days after you send the letter if all other attempts at collecting funds have failed. You must file the lawsuit in the debtor’s county of residence, either in small claims court if the amount due is under the limitations, or in the circuit court for larger amounts due.

5. Provide the court with all documentations related to the debt as proof and be sure to attend all court hearings. If the court finds in your favor, there will be a judgment issued against the debtor. You may be able to include attorney fees and interest in the judgment, depending on what your contract with the debtor and/or invoices stated.

6. Collect the debt with court executions on the judgment, such as garnishment of wages or bank accounts or a lien on property. The process for such executions is specific in each state and county; therefore, hiring legal counsel will be a great benefit to you, especially at this juncture.

Tips & Warnings

• If you are unfamiliar with the legal proceedings in your state, consider hiring a collection agency or an attorney specializing in collections to assist you with the court process.

• The legal consequences of harassing a debtor can be severe, so be careful how you approach this matter. Sections 805 and 806 of the Fair Debt Collection Practices Act have strict rules regarding contact with a debtor and what constitutes harassment. If you plan to collect the debt on your own, you must be familiar with this information.

References

• Federal Trade Commission: Fair Debt Collection Practices Act
• Michelle Cramer; 5 years experience as legal assistant specializing in debt collection; Columbia/Springfield, MO