You have a right to collect the money that clients owe you and several options for getting the job done. Each approach comes with its own pros and cons, so it’s important to select the one that will help you achieve the most favorable result with the fewest headaches.
Direct Debt Collection
Direct debt collection is often the first avenue business leaders pursue because of its simplicity. You may send notices and attempt to contact the debtor directly to collect what they owe or create a payment plan. While doing your own debt collection means you will encounter fewer restrictions, it does require time and effort.
You may decide to outsource the work to a collections agency instead. If you choose this route, it is important to keep in mind that collection agencies must conform to federal law. If a debt collection agency violates these laws, your company may face liability for its actions as your vendor.
A creditor can initiate court proceedings to collect a debt, but going to court is costly and time-consuming. The amount of the debt must significantly outweigh the costs and drawbacks associated with using the legal system to resolve your issue. Therefore, taking your matter to court is a viable option for collecting on large debts, but it is inadvisable for settling smaller debts.
Involuntary Bankruptcy Procedures
You may choose to take actions that would force a debtor to initiate bankruptcy proceedings. While this approach may enable you to recover some of the debt you are owed, you run the risk of suffering greater financial losses because parties involved in bankruptcy proceedings typically obtain some relief from their financial obligations.
Proceed with Caution
It is vital to understand your options when it comes to debt collection. While you deserve to collect what people owe you, choosing the wrong strategy can do more harm than good. To protect your business when collecting debts, consider consulting an experienced business litigation attorney who can efficiently and effectively guide you through the process.