Collecting funds from an unpaid loan or overdue account can pose a significant challenge, leaving individuals and businesses unsure how to proceed and how they can recover what is owed to them. Looking into the options available after attempting to collect outstanding invoices themselves, the decision often boils down to employing the services of a debt collection agency or seeking the expertise of a debt collection attorney.
So how should you choose who to use?
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What is a Debt Collection Agency and When To Hire One?
At its core, a debt collection agency serves as the cavalry called in by lenders and creditors when initial attempts to collect a debt reach an impasse. Working on behalf of the creditor, these agencies use various methods to reclaim debts, such as contacting debtors, sending notices, and notifying credit reporting bureaus.Great for handling a large volume of consumer debts, debt collection agencies are particularly suited for creditors looking for a cost-effective and efficient solution.
What is a Debt Collection Lawyer and When To Hire One?
In contrast, debt collection attorneys typically employ legal remedies to pursue debtors who resist payment. Steering clear of aggressive tactics, they opt for a more legalistic approach, including sending demand letters, initiating lawsuits, obtaining judgments, and enforcing these judgments. Having an expert in the legal intricacies of collections and debt law is helpful in complex debt situations, when other solutions have been attempted and rejected. The debt collection attorney you hire will be able to cut through delaying tactics by pursuing strategies that your debtors will have to comply with.
READ MORE: Debt Collection Lawyer or Agency: Which One to Choose?
3 Pros and Cons of Hiring a Debt Collection Agency
Pros:
- Cost-Effective for Small Debts: Collection agencies often work on a contingency basis, charging a percentage of the amount collected. This makes them cost-effective for smaller debts.
- Specialized Expertise: Agencies specialize in debt collection and have established methods, making them efficient in handling a high volume of cases.
- Less Intimidating Approach: Collection agencies typically employ less confrontational tactics, which may be more suitable for debtors who are willing to pay but facing financial challenges.This will ensure you’re able to maintain a cordial and professional relationship with your clients, with the hope of working with them again once their financial situation changes for the better.
Cons:
- Limited Legal Recourse: Collection agencies have limited legal powers compared to attorneys, making it challenging to pursue complex legal actions.
- Ethical Concerns: Some agencies have faced scrutiny for engaging in aggressive or unethical practices, potentially harming the reputation of the creditor. If you’re going to go with this option, as with hiring any person or business to represent you, investigate them carefully before engaging their services.
- Standardized Processes: Agencies may use standardized approaches that lack the flexibility needed for unique or complicated debt situations.
3 Pros and Cons of Hiring a Debt Collection Attorney
Pros:
- Legal Expertise: Attorneys possess a deep understanding of legal intricacies, allowing them to navigate complex debt situations effectively.
- Legal Threat Carries Weight: The threat of legal action from an attorney may compel debtors to settle voluntarily, avoiding lengthy and drawn out legal battles.
- Tailored Solutions: Attorneys can craft customized settlement agreements, considering the unique circumstances of each case and protecting the creditor’s interests.
Cons:
- Higher Costs: Attorneys often charge higher fees, whether hourly or based on a percentage of the recovery, which can be a significant drawback for smaller debts.
- Potential for Intimidation: Some debtors may be intimidated by the involvement of an attorney, leading to strained and damaged relationships.
- Time-Consuming Legal Process: Legal proceedings can be time-consuming, delaying the resolution of the debt and tying up resources for an extended period.
READ MORE: What is Monetaria?
So Who To Pick: A Collection Agency Or Collections Lawyer
How to choose whether to go with a collection agency or debt collection attorney to recover the funds owed to you depends on the nature and size of the debt, the relationship you have with the debtor, and resources you have available to you while a third party works on your case. Whatever option you choose that works best for you, it is crucial to ensuring the selected collections agency or debt attorney has the necessary experience, commitment and understanding to address the unique needs of the case.
We’re happy you found this article informative! Go back to our blog page to find more tips, tricks and guidance on collections, to ensure your business gets paid.
If you have unpaid debts that need to be recovered, commercial debt collection may be a good option for your business. A commercial debt collection agency can help you with the process of recovering past-due accounts and provide guidance on best practices for managing accounts receivable.
Led by a team of experienced commercial debt collection attorneys, Monetaria Group has lawyers for debt collection and helped hundreds of businesses recover and collect their outstanding debts and payments. Schedule a FREE consultation with our expert team to see how we can help you recover your money today!