Methods for collecting debts have increased over time. Because of credit friendly laws, such as the Fair Credit Act, creditors have more legal options when a debtor refuses to pay. Ranging from self-made payment arrangements to third-party involvement, debt collection efforts have become less stressful and more successful. Creditors are able to collect outstanding debt through personal contracts, court-awarded judgments, court-awarded liens, and court-awarded garnishments, and other third party collection efforts.
Personal Arrangements
Creditors desiring to have a personal involvement in debt collection are using personal contacts during collection efforts. This method is costly and time-consuming. The initial point of contact is either a telephone call or a letter requesting a set number of payments for a set amount. For example, a debtor owning $1,000 may be asked to pay $100/month for 10 months to ensure the debt is paid in full. This technique is most effective when the debtor is willing to pay but is experiencing difficulty paying. Not only is the debt resolved in a timely manner, but also the debtor and creditor are able to make arrangements suitable to the debtor's budget.
Court Orders
Legal action may be required for debt collection. Court-awarded judgments allows the creditor to collect the debt with an aggressive approach. After a judgment is granted, the creditor is able to pursue a lien or garnishment against the debtor.
A lien is placed against the debtor's property or assets. Because the creditors has an interest in the debtor's assets, the debtor cannot sell or trade the property without the creditor receiving payment.
Courts can also order garnishments, such as wage garnishments. A monetary garnishment can be attached to any income expect for governmental assistance such as SSI, unemployment and Temporary Aid to Needy Families. A garnishment cannot be attached to court-ordered child support.
Collection Angencies
Collection agencies are used when the original creditor does not have time to pursue a debt. The creditor either assigns the debt to the company's collection department or sells the debt to an outside collection agency. Collection agencies retain rights to collect the entire debt within the limitations of the Fair Credit Act. In addition to resolving unpaid debt, a collection agency saves the creditor time and money.
0 comments:
Post a Comment