Lending your money to someone you know nothing about, except the debtor’s basic information, is a major risk. You never know if they can pay back the money owed to you and if they can pay the debt on time. There is really no guarantee. In this case, debt collection companies can give you peace of mind when collecting bad debts. Debt collection agencies will be the one to face your debtors and collect funds in the optimal manner. These companies are governed by legal bodies to accrue debts without having both the lender and the debtor’s sides compromised and harassed.
Debt collection companies offer different means in which to collect money, and one of the most common approaches they use is the contingency basis. In this scenario, lenders need not pay upfront costs to the collection company unless they start collecting the debts owed to you. However, if the agency cannot in any way collect funds, you won’t be charged a single cent by the debt collection company. Most collection companies take on three steps to ensure the success of the pursuit.
Step 1—The first draft of four demand letters will be written. These demand letters are certified, legal, and under the advice of an attorney. These documents will serve as a legitimate notification or reminder to your debtor of the debt owed and the legal matters that may take place once the other party does not make necessary actions to pay the outstanding bills. Aside from sending demand letters, collection agencies will also contact the debtor, either through phone, email, mail, or fax. This communication should let you know whether or not the debtor is going to pay the debts. If in case the debtor decides not to make any necessary actions to pay his bills, the collection agency will then move to the second step, wherein an attorney will have to open a case against the debtor.
Step 2—Communication escalates between the local attorney and the debtor through legal demand letters or direct contact. If by all means, the debtor fails to comply, the case will have to be moved to the next step.
Step 3—The collection agency initiates an investigation into the debtor’s assets. If there is no way to recover the money through the debtor’s assets, the agency will advise you to close the case.
If, however, litigation is advised, and you decide not to pursue the case, you will not be charged any amount by the attorney, or the collection agency. But when you decide to proceed with the litigation process, you will have to pay for all associated legal fees. Depending on jurisdiction, court costs may range from $700 to $1,200. Upon payment, the case will be opened and the affiliated attorney will take on necessary steps to collect the money owed. If this attempt fails, you will be recommended to close the case and you won’t have any responsibilities to pay the collections company and the attorney.