Lawsuits versus a Collection Agency
If all you have to do to collect overdue payments from a delinquent debtor is sue them, they why doesn’t everybody sue? The short answer is that lawsuits aren’t always necessary, they’re expensive, and time consuming. You will likely be able to recover a large majority of your debts without having to resort to a lawsuit.
Rather than sue a debtor who refuses to pay you back, you can hire a collection agency. Collection agencies specialize in getting non-paying parties to repay what they owe. As service providers for your business, collection agencies can also help you in determining whether or not a lawsuit is the right option at the right time.
Another important factor in choosing a collection agency over a lawsuit is the service collection agencies can provide you. On such service is “skip tracing”. To sue a party, you need to serve them with a summons. Attorneys don’t generally specialize in finding debtors who’ve left town without a trace.
However, collection agencies are equipped to do just that. Once they find the delinquent party, then perhaps you may wish to pursue legal action. Short from that, you still need to know where your debtor is before you can serve him or her with a summons.
The legal system itself is not a fast moving entity. As time passes, your chances of being paid back reduce drastically. After 90 days, your chances drop significantly. The legal process allows for a lot of time to pass between each phase. Therefore, a lawsuit can take well over 90 days to progress. Rather than waiting all this time, you’ll find hiring a collection agency before the 90 day drop-off period significantly increases your chance of being repaid.
Before you resort to a lawsuit, you’ll find hiring a collection agency to be a better starting point in debt recovery. There are cases when hiring an attorney becomes necessary, though. If the debtor is especially stubborn and you’re not able to collect on the debt, then turning to a collection attorney may be your only resort.
At this point, the debt is likely way past the 90 day drop-off point. In some cases, if you’re already starting with a high debt that’s extremely late, you may wish to go ahead and start with an attorney right away and forgo hiring a collection agency. These cases will likely be few and far between, but they may exist.
By using an attorney to file a lawsuit, you significantly increase your chances of debt recovery significantly increase. Once the lawsuit produces a judgment against a debtor, there are many ways you can recover the money owed you. In most (but not all) states, the lawsuit will allow you to garner wages to collect on the debt. You may also be able to seize liquid or non-liquid assets from the debtor to alleviate the debt they owe you.
Overall, your first recourse in debt recovery should more than likely be to use a collection agency. They’re quick and effective. For the stubborn debts that just won’t get paid, you may need to resort to a lawsuit.