The Debt Collection Process

The Debt Collection ProcessCollection agencies are businesses that, as the name implies, collect the debts that are owed by consumers (and companies) to other companies.  Generally, debt collection companies take a percent of the debt owed as payment for their services.  But how do debt collection companies really work?

The initiation of debt occurs when someone owes.  This can be for a car, a medical expense, a judgment, or even a house. There are many types of debt like credit cards or personal loans. There are even debts that occur when a promise to pay is made, formally or informally.  In most cases debt is paid and everyone is happy.  But in reality there is a percent of the population that don't pay debts.  This can be for legitimate reasons like illness, job loss, or death. But some people just don't pay. 

When a debt goes unpaid for a period of time, usually within about 90 days, the bill is sent to a collection agency.  A collection agency acts as a third party agent to collect the outstanding debt. 

When enlisting the assistance of a collection agency, be sure you understand their terms of service up front as you'll be asked to sign an agreement allowing them to collect on your behalf.  Terms will include how the agency will be paid and any costs that you are expected to pay up front to offset expenses.  For example, if the account you want to collect is going to litigation, there will be an expense to file the case in court – this will most likely be an up front expense that is your responsibility.

The first thing a collection agency will do, after entering all the pertinent information into the system and researching the debtor, is to "verify" the debt by contacting the debtor by phone and mail and giving them time to respond.  The notice must tell how much is owed, who the debt is owed to and what to do if the information (and debt) are in error.  Responsible people will generally respond within this time to either dispute or pay the debt.  But, as you may already know, once a debt goes unpaid for a period of time, it's unlikely a first contact will yield any resolution. 

The next step in the collection process includes attempting to discuss the debt with the debtor.  Sometimes it's possible to get the debtor to agree to installment payments or a reduced, lump sum payment.  Getting to this discussion, however, relies on a great deal of patience and tenacity.  Make no mistake, people who are in tough financial situations will go to great lengths to avoid phone calls and ignore collection attempts.  Consistent effort is put forth to make contact for as long as it is deemed possible to collect, when there are verified assets and / or the debtor is employed.

While collection agencies, in general, have a bad reputation, it's important to know that there are government rules that oversee the collection process: the The Fair Debt Collection Practices Act (FDCPA). The vast majority of collection agencies honor the FDCPA rules through the process of collecting debt. 

When a debtor is successful at avoiding all attempts of collection through the agency, you may want to consider litigation, suing for the amount owed.  Not every case is suitable for litigation however.  For example, if the debt is small, there is no contract or little proof of the debt. In that case you may be advised that it is best to consider the debt a write off for tax purposes.  But if the amount is large enough, there is a contract or other proof of service, a litigation service will be recommended.  

At Nationwide Collections, we know it's important to go about debt collection legally. We also know that only a consistent effort will yield results with the most stubborn past due accounts.  If our efforts fail, we will review your case for potential litigation. If you have additional questions about the collections process please feel free to contact us.

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Nationwide Collections :: P.R. Company 1045 Rt 109 - Lindenhurst, NY 11757 - 877-840-2140