It’s happened: you’ve received a letter saying that a customer of yours has filed for bankruptcy to resolve their debt problems. While this can be a frustrating situation, don’t waste your time worrying about what may or may not happen. Depending on your customer’s bankruptcy details, acting quickly could result in repayment for a portion or even all the unpaid debt you are owed. The debt collection process in cases of bankruptcy are not as strenuous as many companies seem to think, especially if you know what your options are. This article will explain what happens when someone you’re trying to collect from files for bankruptcy and how to move through the debt collection process.
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As a business, it can be frustrating watching days, weeks, or even months pass by while you wait for reimbursement for your valuable time, products or services. Afterall, the saying “time is money” holds true when it comes to unpaid debts. According to figures from Inside Account Receivables Management, by the time receivables are 90 days overdue, they could be worth only 20% of their original value.
So, how do you create a sense of urgency for your debtors to take prompt action as opposed to remaining passive? Rather than expend unnecessary time, energy, and resources pursuing overdue invoices, allow us at Alexander, Miller & Associates to help capture the attention of your debtors by using the following powerful techniques:
What is the process for placing an account into collections? How do you do it, and what happens once you do? We’ve put together this handy step-by-step guide to show you the process in more detail. With this, you can see how Alexander, Miller & Associates would go about helping you collect what’s owed.
Small and medium businesses often have a difficult relationship with debt collection. They want to be paid for their services or products but what they don’t want is to come on too strong and risk losing a client. However, this stems from the very idea that asking people for your money back is a bad thing. The first thing that needs to be done is mindset-building.
Running your business can be difficult. You’ve got projects, employees, accounts. A hundred spinning plates, and they’re all tied to your income and your company’s success now and in the future.
Maybe you run your business because you’re really passionate about what you do, or maybe you found something you’re really good at and enjoy supporting yourself with hard won skills and time. No matter why you do what you do, at the end of the day you have to get paid for all that work. Even the most enthusiastic entrepreneurs have to draft an invoice to afford their overhead.
With any business, it’s important to follow the trends happening across the world and its various markets. From social media trends to changes in domestic or international markets, keeping an eye on the flow of money and interest around the world is a crucial factor in maintaining a solid bottom line. The same is true for your clients, and while you’re probably already aware of everything that directly impacts your own business, it’s prudent to consider the perspective your clients are facing at the same time.
If you find yourself or your business with debts that have gone to collections, it can seem a little overwhelming. We’ll break down the process of paying off the debt in collections so that you can get them handled quickly and efficiently. To start, it’s important to realize that if you have debt that is in collections, it has been due for quite some time. Not only does this affect the business or person you owe, but it also most likely has an impact on your credit score. It’s important to get this resolved as soon as you can.
Your first step is to make sure that the debt is yours. As obvious as this may sound, you will want to validate that the debt the collector is calling about is in relation to you as an individual or business. If it is not debt that you recognize, be sure to request proof from the collector before making any payments.
Negotiating With The Collector
The first step to paying off the debt in collections is to answer the phone when the collector calls or get in contact with them through a written request. They have been commissioned through the person or business that you owe to obtain the outlaying debt. The first step is to negotiate with the collector. There is something called a settlement payment, which works by paying off the amount so that the account can be deleted off your credit report in return. You will need to send in a written request to the collector for this. This is the best-case scenario, as it lessens the impact on your credit report and also allows room for negotiation. You can also do this over the phone, so long as you are careful with your wording. Most likely, you will be able to work with the collector to negotiate a lower payoff.
Getting it in Writing
Whether you submit a written request or call to negotiate, be sure to get all of the agreements in writing. You can ask the collector to give you access to a letter with all of the payment information via mail or fax, and make sure you do this before you pay anything. This is especially important if you choose to go the settlement route.
Having to Pay in Full
If the above scenarios don’t work for your specific case and collector, you may have to pay in full. Again, you should try to negotiate to pay the amount in full and have it removed from your credit report. Be sure to keep the general rule of having it all in writing before you make the payment.
There are other ways to pay off your debt in collections, although they may not be your first choice. One option is to at least make sure that the payment is labeled as “Paid in full.” This is the best case if the collector will not remove it from your credit report, and this should also be in writing. If this is simply not possible, you can request that the account is labeled as “Paid. Settled.” If you do not want to do any of these steps, you can always pay in full and pay off the debt.
Whatever the choice is that you make, paying off the debt is the end-goal of the collector’s process.
What is Commercial Debt Collection?
If your business is looking to outsource debt collection, commercial debt collection is a good option to consider. Outsourcing debt collection can take worry off your plate and get your business the money it is owed in a way that is safe and proficient. Commercial debt collection works to collect money that is owed between businesses for various types of accounts or production. For example, if a large business orders product from a small business, and they do not deliver, they may turn to commercial debt collection. Commercial debt collection can work for businesses of all sizes and may be a good option for your business to receive its debt pay-offs without the hassle of doing the work.
What types of debt do they collect?
The types of businesses that commercial debt collectors work for vary across the board. Some examples are colleges and institutions, major companies, sales companies, and construction companies. The companies can be of all sizes and provide a wide range of services. They work to collect outstanding debts on accounts between businesses. The reason for debt collection is to ensure that funds that were promised or agreed upon by a contract are delivered. Businesses often outsource to commercial debt collectors when their own attempts at collecting the debts on their outstanding accounts between contractors and other businesses have proven unsuccessful.
How do they collect?
Commercial debt collectors operate through first determining who the business owner is or who is in charge of paying bills. It’s essential that the right party is reached to ensure pay-off can happen in a timely manner and that the topic of finances is discussed with the right person. Once the correct person has been identified, the commercial debt collectors are then able to make calls at regular intervals. These calls are used to determine which payment method will work for both parties and the timeline they will make payments on. Having a commercial debt collector be the one to contact owners of outstanding accounts can be used to ensure that your business remains profitable and receives the money it deserves.
What differentiates them from consumer debt collection?
When determining the difference between consumer and commercial debt collection, it’s all in the name. Consumer debt collectors work for a business to collect debts that are owed by an individual to the business. Consumer debt collectors are subject to FDCPA governance (the Fair Debt Collection Practices Act), whereas commercial debt collectors are not. This doesn’t mean that commercial debt collectors are free from all rules, though. Commercial debt collectors are not able to use tactics that are aggressive, threatening, or illegal.
Are they regulated?
Regulations also differ based on the state that a commercial debt collector is in. Some states have a requirement for commercial debt collectors to be licensed and bonded, and there are also associations that work to ensure fair practices.
If your business is looking into outsourcing your debt collection services, it’s time to look into which accounts have outstanding debts. If your primary debt issue is individuals and consumers, a consumer debt collection is best. However, if you have relations with businesses where accounts are unsettled, outsourcing these debts to a commercial debt collector can assist you by taking over the process.
There’s no doubt that you’ll have to deal with some emotionally-charged calls as a debt collector. From the yellers to the criers, emotional clients have a way of taking a toll on your own emotional state. A few choice insults can leave you angry or crushed for the rest of the day, while a client with a truly sympathetic case may leave your feeling guilty for doing your job. For your mental health, it’s essential that you learn how to process and deal with your feelings after a tough call.
When You’re Mad or Hurt
No matter how long you’ve been a debt collector, sometimes a client knows exactly what to say to get your blood boiling. Maybe they attack your character or resort to slurs. In these cases, it’s best to give yourself a break after a phone call. If you’re worked up, you won’t truly be able to focus on your next call. Or worse, you could bring your own anger into the call and put yet another client on edge.
Remove yourself from your desk for a moment to take a short walk or get some water. Getting away and moving around will help you clear your head. When you’re feeling especially low, it doesn’t hurt to have a few meaningful affirmations to repeat to yourself. Take some deep breaths and remind yourself that this person isn’t actually angry with you— they’re angry with their situation, and you happen to be the easiest punching bag.
When You’re Annoyed
You may not encounter a call that makes you truly angry very often. But you probably encounter calls that leave you annoyed every day. Rude clients, clients who lie, clients who ramble to avoid talking about their debt. There’s plenty of calls that can make you frustrated and cranky, and that’s okay.
But if your notice that your frustration is spilling over into other situations, it’s time to take steps to deal with it. You may not even realize a call has bothered you until you recognize subtle changes in your mood or behavior. When you’re constantly annoyed, you’ll lose patience with other clients, coworkers, and friends and family.
When you’ve had a rough day, pay extra attention to how you react to those around you. Are you really mad at your partner for forgetting to unload the dishwasher or are you still miffed that a client hung up on you?
When You’re Sympathetic
Sometimes you encounter a client who has truly heartbreaking story. They’re kind and apologetic, and they’ve ended up in a tough financial situation through little fault of their own. Know that it’s okay to feel sympathy. You’re a human being, and the client is likely to be more cooperative if they know that you actually do empathize with them. However, don’t let those feeling turn into guilt or get in the way of doing your job.
Remember that this debt is hurting your client too; it’s ruining their credit, and the sooner they pay it off, the better. You didn’t cause that situation, and you have nothing to feel guilty about. With or without your calls, that debt is still there, wreaking havoc on their finances and credit. Think of yourself as someone who is trying to help them address that problem rather than someone who is out to get them.
When you’ve had a rough day, give yourself grace and remember that you’re entitled to emotions too. But to maintain your professionalism and mental health, it’s important to deal with those emotions as fully and as quickly as you can.
If the thought of dealing with a debt collector seems daunting, you’re not alone. Often there can be confusion or misconceptions about debt collectors and why they do what they do. It’s important to be informed with the correct information. At Alexander, Miller & Associates, LLC., we want you to feel confident in your information regarding debt collectors. We hope to use this post to clear up some common misconceptions and dispel some myths about debt collectors.
Myth One: It’s okay to keep ignoring the call…the debt will go away eventually.
This myth is far from the truth. To start, the debt will continually affect your credit report, as it will be listed on the report until its time limit is reached. Once it is no longer on your credit report, it still remains in the creditor’s records. This can affect you later down the road if you need to utilize an account with the same business again. It’s also important to remember that while ignoring is the easiest step to take, it isn’t the best choice to make. As we’ll go over later in the post, paying off the debt will stop the calls for good and help increase your credit score.
Myth Two: Once I pay the debt collector, my credit report will not have it listed and my credit score will be able to go up.
Not so fast…just because you have paid the debt collector doesn’t mean it automatically gets taken off your credit report. In fact, the debt collector’s responsibility is to mark it as paid rather than remove it completely. In addition, it is always a positive thing to pay off the debt in regards to your credit score, however, it may take a while until you see that number go up. To increase your credit score, you should expect to allow time and positive payments to build before the number goes up.
Myth Three: If I just tell the debt collector to stop calling, they will stop.
If you are telling the debt collector to stop calling while at work due to rules set by your employer, the collector will have to cease calling while at work. You can also tell the debt collector not to call at certain times, however, it is essential to know that the debt collector does not legally have to accept that request. If you want to request that debt collector stop calling you altogether, you will have to submit a written request in order for them to legally have to honor that. The written request should be simple and to the point, and you can find help in drafting this letter through a simple search online.
Myth Four: I can just pay the original creditor rather than the debt collector.
What this boils down to is the contract between the original creditor and the debt collector. Since the original creditor could not obtain the money from you, they transfer that responsibility to a debt collector. It is also a possibility that the original creditor sold the debt to a debt buyer (different than a debt collector) and no longer has any tie to that debt. There is always a contract involved between the two parties, and you may find that the contract does not allow the creditor to accept your payments. At this point, you will need to pay off your debt through the debt collector.
Myth Five: Paying some of the debt off, but not all, will at least tame the calls from debt collectors.
While, yes, some payment is better than none, you are obligated to pay off the debt completely. While it may cause a small break in the calls, it will not ultimately work to cease communication from the debt collector.
Myth Six: Collectors can seize my property and take money from my bank if I don’t pay my debt off.
Debt collectors make money when consumers pay off debt. While this is the route they hope to go in, it is a myth that they can threaten to seize property or threaten other measures like jail time. A debt collector can only seize property if the debt was tied to the property and they have the ability to repossess it. Another instance where this can happen is if the debt collector sues and gains a court judgment allowing them to do so.
Myth Seven: The debt collector can only talk to me about my debt.
While this is true in some circumstances, there are three instances where a debt collector can talk to others about your debt. If you have an attorney, the debt collector can share information with them. If you are married, the debt collector has the ability to talk with your spouse. If you are under the age of 18, the debt collector has the right to talk to your parents. Aside from these three instances, it is against the law for them to discuss your debt with anyone other than you, the original creditor, and the credit bureaus.
We hope that dispelling some of the common myths about debt collectors was helpful and that you feel more informed about the debt collection process. If you have additional questions or want to know more, feel free to reach out to us today.