Is a Collection Agency Or a Lawyer the Best Way to Collect Debts?
Conducting business in today’s climate can reap a lot of rewards. Unfortunately, however, it can also have risks as clients can sometimes pay their debts late or even not at all. When a business runs into a non-paying client, there are some options available to them. We will look into these different options and what the pros and cons of each hold for the business owner.
The first option is to handle the debt collection process on their own. The monetary output for such a task is minimal, usually consisting of repeated letters to the client and/or travelling to the clients’ place of business if they are local, but the time consumed this way is great.. The downside to this process is that the delinquent client stands to not pay their debt most of the time with this process. This process has the least amount of “weight” behind it to persuade the client to pay their debt.
The second option would be to enlist the services of an attorney to help collect the debt. This has the most “weight” behind it to coerce the client to pay their obligations with the threat of legal action. No one likes the threat of a lawsuit or going to court to defend themselves. The downside to this approach is that the legal fees charged to the business by the lawyer can be quite high. In many cases, the business ends up paying out of pocket to collect on a debt that the client is not able to pay. Suing a client for a debt that he or she has no way of paying on is a very costly proposition. This option is only feasible for a very high debt amounts and a business owner who can take the hit to the wallet in legal fees to pursue the debt. However, for most businesses, this option should not be considered in the debt recovery process.
The third and best option that businesses have at their disposal is to hire a collection agency. The agency can do everything that you can do (writing letters, phone calls, etc.), but do it more successfully and efficiently. Collection agencies are also a less expensive option for the business owner than using a lawyer. This eases the business owner from the mundane task of placing phone calls to the debtor and chasing the debt themselves. This stands as the best all-around option for collecting a debt as it entails the outside help that is needed, without the expensive fees a lawyer will charge for the work.
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