When a Debt Should Be Sent to Collections
One of the most frequently asked questions concerning debt is when to turn a debt over to a debt collection agency. When customers or clients owe you money and refuse to pay, how many chances should you give them to pay up before you turn their debts over to someone else? Knowing the answers to these questions is imperative for good business practices.
There's no hard and fast answer to this question. Some companies choose to institute a "three strikes and you're out" policy, where they'll try to contact clients three times. If, after those three contacts, the client doesn't respond, they turn the debt over to a collection agency. Other companies choose, instead, to use a certain time frame. If, after 60, 90 or 120 days (depending on the company), the client hasn't paid their bill, the company will then turn the debt over to a collection agency.
You'll have to make this decision for yourself. A general rule of thumb is that once you've tried multiple times to collect on a client's debt and the client has failed to pay, you can then turn the debt over to a collection agency. While it's never an easy decision to make, sometimes it's necessary because some people simply won't repay their debts. If you've given the client ample opportunities to pay the debt or at least set up a payment plan for paying down the debt and he or she still doesn't make an effort to repay, you've done all you can do.
Why Do People Refuse to Pay Their Debts?
While it's easy to assume that everyone who doesn't pay his or her debt is refusing to do so out of sheer stubbornness and irresponsibility, this isn't always the case. There are many reasons people may become delinquent on their bills or stop paying their debts altogether. Occasionally, there will be some bad seeds who just refuse to pay because they don't want to or because they knew beforehand they'd be unable to pay the debt they ran up but decided to do it anyway.
More often, though, there are extenuating circumstances that cause people to stop paying off their debts. The economy plays a huge factor. When times get tough, people suffer economically, and they'll often stop paying their debts in order to use that money for something else they see as being more important. Paying off a credit card bill doesn't seem as important when it comes between that and buying groceries.
Other people may have recently suffered the loss of a spouse, often cutting their household income in half or even more than half. Additionally, a widowed spouse might also suddenly incur the debts of his/her deceased spouse, which is sometimes an expense s/he isn't prepared to pay. Sudden, expensive illnesses or medical treatments, an unexpected accident like a house fire or automobile accident or an unexpected loss of a job can also lead to unpaid debts.
Despite what's going on in the lives of your clients and customers, though, they still made a commitment to repay you what they owe. Therefore, if they aren't willing to work with you to repay you, then you are well within your rights to take things to the next level by hiring a debt collection agency.
Why Use a Professional Debt Collection Agency?
Put simply, a professional debt collection agency is going to be much more aggressive than you probably feel comfortable being. To debt collection agencies, your clients are faceless people who owe money, nothing more. They don't have a problem aggressively pursuing the clients and coming at them from multiple angles all hours of the day or night. It's much more likely that a collection agency will be able to get people to pay what they owe.
What Does a Debt Collection Agency Do?
In short, a debt collection agency collects debts. They'll make continuous, unceasing attempts to collect a person's debt in exchange for a percentage of what that person owes you. They'll track the person who owes you money and then contact them in multiple ways, sometimes even through friends and relatives, to get your money. If, after an extended period of time and multiple contacts, they can make no headway with the client, they'll then turn his or her case over to a lawyer, and legal actions will be pursued.