Debt recovery is collecting outstanding debts from individuals or companies owing money to a creditor.
If you’re on the receiving end of debt recovery, you know it can be stressful, but there are effective ways to deal with debt recovery and resolve disputes so they stay out of court.
Read the rest of this article to learn more about debt recovery.
What are the Stages of Debt Recovery?
Debt recovery usually occurs in these specific stages.
Debt Collection Methods and Negotiations
Creditors try to recover the debt by sending letters or making phone calls to the debtor. This usually occurs within a 30-day period and it can include negotiations so that the payment can be settled according to a payment plan.
Formal Demands
If the debtor isn’t responsive to initial debt-collection methods, they will receive a formal demand notice. This will mention all the details pertaining to the outstanding debt, such as how much is owed, when the payment needs to be made, and what consequences they stand to face if they don’t pay the debt by the date specified in the letter.
You can consider the demand notice as being a final warning before legal action will be taken.
Hiring of Debt-Collection Agencies
The creditor might hire a debt-collection agency to recover the debts on their behalf. This involves the agency making repeated calls to debtors or sending them emails and letters. They will also try to negotiate payment plans to try to settle the debt.
In some cases, debt-collection agencies can be quite aggressive in their approach, which can cause hostility and even create disputes in creditor-debtor relationships.
The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from engaging in the following behaviors.
- They’re not allowed to call you an unreasonable amount of times, before or after certain times in the day.
- They’re not allowed to contact you at your place of work if this isn’t allowed by your supervisor.
- They’re not allowed to disclose private information about your debt to third parties.
- They’re not allowed to use harassment or accusatory language.
- They’re not allowed to misrepresent information about the debt or threaten to expose false credit information.
- They’re not allowed to make contact after they’ve received a Cease-and-Desist letter.
Debt collectors need to send you a dunning letter to be compliant with the FDCPA. This letter needs to include the following information:
- The debt amount.
- The creditor’s name and address.
- Stating that the debt will be valid if the debtor doesn’t respond to the letter within 30 days of receipt.
- Stating that if the debtor disputes the debt, they need to do so within 30 days of receipt.
- Stating that if the debtor wants the name and address of the original creditor, the debt collector will provide it.
Legal Action
When debt collection doesn’t work, legal action can be taken. A lawsuit will be filed. Ruling in the client’s favor means that the debt will be settled via the debtor’s assets, wage garnishes, or other means.
Can Debt Recovery Be Pursued if You Declare Bankruptcy?
If you’ve declared bankruptcy, it’s not that easy for debts to be recovered. This is because bankruptcy is meant to provide companies or individuals with debt relief.
That said, when you declare bankruptcy, you’ll still have to have a plan for repayment of your debts, which can include asset liquidation. Factors such as your income and assets will be considered when drafting this plan.
Although creditors will be able to receive some of the outstanding debt, this will likely be a smaller amount than what’s owing.
If you’ve been granted a discharge of the debt, you don’t have liability for the payments and the creditor won’t be able to recover the debt from you.
How Should Disputed Debt Be Handled?
You might want to challenge the creditor’s claim of your debts. Perhaps you disagree with the amount owing or the debts have already been collected.
If you’re challenging the debt, there are things you can do.
Request Information About the Debt
Send the debt collector a dispute letter. This should mention that you don’t owe the debt and include a request for debt verification so you can get more information about it.
The company will have to stop trying to collect the debt from you until it sends you written verification of the debt.
Make sure you keep a copy of the letter for your records.
Keep Everything in Writing
It’s important to keep a record of all interactions with debt collectors and all information you’ve received about the debt, such as written notices.
Consider the Debt Legality
In some cases, the debt might not be lawful or valid. For example, if the debt is old, it won’t be able to be enforced during a lawsuit.
Hiring a lawyer can help you learn about all the legal rules surrounding your debt so you can clarify your position and if you need to pay the outstanding amount.
How Can a Lawyer Help You with Debt Recovery?
Hiring a lawyer will assist you in various ways, such as the following:
- A lawyer will help you by ensuring that the debt collection and recovery methods are lawful.
- They will consider state-specific laws that affect the situation.
- If a debt collector sues you, your lawyer will help you to respond and represent you if your case goes to court.
- A lawyer will help you to investigate if the debt is valid.
- They’ll draft dispute letters so that they’re accurate and effective.
- They’ll avoid mistakes, such as not responding to notices, which could cause issues and land you in legal trouble.
Do you need to hire a lawyer to help you with debt recovery?
You should contact a lawyer on ContractsCounsel, an online legal network where clients can connect with vetted, experienced lawyers. They have the experience and expertise when it comes to assisting clients with debt recovery. They’ll help you by minimizing your risks and protecting your rights.
