When collecting debt, it can be tricky to determine when legal action is warranted. Let’s look at the criteria for when your debt collection attempts could benefit from the assistance of an attorney.
Debt Portfolio Considerations
Some debt collecting law firms take the following into consideration before taking legal action:
What is the total number of accounts?
What is the average size of the accounts?
What is the minimum balance on the accounts?
How old are the accounts (older accounts have lower collection success rates)?
Is there a statute of limitations (the accounts in question may have a time limit for debt collection)?
Is there appropriate documentation to prove debt ownership?
Does the law firm specialize in this type of debt?
Attorneys will also consider whether a debt portfolio is worthwhile. A portfolio including many extremely delinquent, high-balance accounts is more compelling than one consisting of a few low-balance delinquencies.
Opportunity for Collection
It’s important to understand whether the debt you’re trying to collect can be paid before you commission the efforts and aid of an attorney. Make sure efforts are worth the time and cost by checking the following:
- Their credit score and credit risk
- Their available assets
- Whether they have any previous judgements against them
- Their payment history trends
Time to Collect
Debt recovery can take time. And the amount of time it takes for an attorney versus a collection agency to collect on your behalf may play a part in whether you choose to seek legal representation.
- May have internal collection agencies
- May be able to send legal letters
- May be able to take your debtor to court
- Can escalate files to speed up the process
- Can garnish a debtor’s wages and place liens on property
- Can collect profits from rental or business income
Debt Collection Fees
Understanding your debt collection fees can help you determine whether taking legal action is in your financial favor. Debt collection fees may be any of the following:
- A flat fee
- A percentage of recovery
- If forwarding to an attorney from a collection agency, a combination of fees owed to both parties.
There are many factors to consider when deciding whether your debt collection needs necessitate legal action. By reviewing the factors listed here, you can determine your legal action requirements and choose the course that’s right for you.
Refer to the National List of Attorneys for assistance in selecting a quality attorney that’s right for you and your debt portfolio, and find the best course of action to successfully collect from your debtors.