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There are various types of debtors. If you are behind on your payments, you may have mismanaged your money, or you may have fallen behind as a result of some financial hardship, divorce, or illness. Regardless, you are most likely familiar with collection agencies. They practice what is known as debt recovery. When a creditor cannot collect its unpaid invoices, they may turn to an outside debt collection firm that specializes in bad debt recovery. Before this occurs, the creditor should notify you in writing that they may seek a debt recovery solution.
The first step a bad debt recovery or collection agency will take is to write you a letter requesting payment within a specified time frame. It may also imply that a lawsuit could be filed. This letter is often effective in 'scaring' a payment out of people. Do not be alarmed. If you have a true financial hardship, you don't need to scrape together everything you have to pay off a threatening debt recovery firm. Make sure you have enough money to live on first. Furthermore, you will most likely have multiple creditors, so why should you necessarily pay off this one in full, leaving nothing for the others?
The Fair Debt Collection Practices Act dictates what a debt recovery solution can and cannot say or do when pursuing bad debt recovery. However, you should understand how a typical debt recovery solution works. The person calling you is paid hourly to sit at a desk and harass payments out of people. They have little to no authority and are usually the 'lowest man on the totem pole'. A collection agency is often a boiler room type operation. Those involved in bad debt recovery have heard every financial hardship and excuse. They only want to hear two things: when you will pay and how much. That's it. Everything else you say to a debt recovery firm will go in
one ear and out the other. You should know your rights. For more information on your rights as a debtor click here.
While the debt recovery firms are governed by this law, there is nothing that legally
forces you to speak with them.
You should also know how a debt recovery solution or collection agency makes money. They operate in one of two ways. Either they have bought the debt from your original creditor or they have been hired by your original creditor to collect the debt on their behalf. If the debt recovery firm has purchased your debt, it was sold at a discount to its
balance. A bad debt recovery firm purchases debts for as little as .10 on the dollar. Then they will call and demand a full payment! If a creditor hires a debt recovery solution to collect its debts, it will pay the collection agency a commission on what is collected. The debt collection agency will in turn pay that annoying agent a commission. So the next time you receive a harassing call from a bad debt recovery firm, remember: that person on the phone is earning a commission on what you pay! Now do you understand why those working for a debt recovery solution don't care about your financial hardship or what you have to say?
To avoid dealing with these debt recovery firms consider hiring a
debt reduction company. A competent debt reduction company can use your financial hardship as a basis to negotiate settlements for you with any creditor or collection agency. We can help stop those harassing calls you receive from debt recovery firms.
Click here for a free consultation from Knockout Debt.
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