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My Business Is Owed a Debt: Should I Hire a Collections Professional?

July 27, 2020
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Small Business Debt Collection

Seeking outside help is often the last resort for those looking to resolve an issue in their business. In the case of debt collection, hiring an attorney, or working with a debt collection agency may seem to defeat the purpose of what you hope to achieve. When you’re trying to collect what you’re owed, money that is vital to the business; you’re not exactly looking to give away a significant portion of that money to an attorney or agency. Lawyers may charge an hourly rate or a negotiated flat fee to work your case, and debt collectors take a percentage, and either may be more than you would ideally want to pay.

Working with a lawyer or debt collector can also feel like just another complication in an already exhausting process.  And while there is a fear of the cost or just skepticism of their effectiveness, there is a level of knowledge and expertise that they bring to help you collect money owed from debtors.
 

Differences Between a Collection Agency and Attorneys

When considering which sort of help to seek, businesses should be aware of the differences between the services offered by a collection agency and an attorney. Collections agencies are well-versed and have systems in place to automate the tasks involved in collections. They can look into the finances of your debtor to figure out if they’re hiding assets. They’re also motivated to perform, as most only get paid after collecting. But, ultimately, they don’t have any ability to compel debtors to pay, beyond what you have; you’re paying for the convenience of taking the work of letters and calls out of your hands. Your debtor might be inclined to ignore the collection agency, just as they did your efforts. However, if you wish to avoid conflict, the agency can take that off your hands.

Where an attorney can help the most is in creating a solution specific to your situation. While it’s instructive to do your research online about the debt collection process, there’s no way to account for the peculiarities that may exist in a given instance. Is the debtor a first-time offender and an otherwise good customer, or are they frequently late with payments? Are there extenuating circumstances that might explain the late payment, and can an arrangement be worked out apart from a contentious collection process? This is also particularly important when the debtor may have borrowed money or bought merchandise on an installment process. Working with a lawyer, you can make the right determination about the right steps to take rather than following cookie-cutter advice.
 

Hiring an Attorney to Collect Overdue Payment

One misconception around hiring an attorney is that, once you retain their services, you’re committing to taking the case to court. While that may be an option if needed, it’s perhaps better in the early stages to think of your lawyer as an advisor to help walk you through a likely unfamiliar process. An attorney can help put a plan in place for seeking to collect your debt outside of legal action. You want to make sure that you’re working according to the proper steps, and not missing any measures or falling into what might be considered harassment. A demand letter is a key part of the collections process, and likely unfamiliar to a business owner inexperienced in collecting; a lawyer can help with the drafting and sending of demand letters that clearly lay out what you expect and what actions you’ll take upon non-payment.

An attorney can send the letters and make the calls as a collections agency would, but also offers the ability to escalate the matter further if the need arises. Whereas a collections agency is barred from pretending to be a lawyer or making statements about potential legal action, a lawyer can do both on your behalf, and you shouldn’t underestimate the value of a firm’s letterhead in communicating the gravity of your demand letter.

With any luck, the possibility of having to go to court will be enough to motivate your debtor to make their payment, but should the matter persist, with a lawyer engaged, you’re already well-positioned to take the case to small claims court with that attorney intimately familiar with the issues. Provided that a judge agrees with the case as your lawyer has laid out, with the evidence presented, the debtor is then compelled to pay what the owe or face liens against their property and wage garnishment until the debt is satisfied.

Reticence about working with a lawyer is understandable, given concerns about both cost and complications. But businesses that are struggling as to how to pursue money owed have to consider the opportunity cost of working the process on their own; time spent calling or writing letters is time not spent on your actual business. In addition, failing to collect sets a bad precedent for your business and deprives you of needed funds that are rightfully yours. Working with a lawyer offers the path where everything will be done until the debt is resolved or paid in full.
 

Get Legal Advice without the Large Pricetag

Working with LegalShield attorneys is a cost-effective way to get the legal advice you need on debt collection and any other issue your business is facing. Small business plans start at $39 a month.

LegalShield provides access to legal services offered by a network of provider law firms to LegalShield Members through member-based participation. Neither LegalShield nor its officers, employees or sales associates directly or indirectly provide legal services, representation or advice. See a plan contract at www.legalshield.com for specific state of residence for complete terms, coverage, amounts, and conditions. This is not intended to be legal advice. Please contact an attorney for legal advice and assistance. If you are a LegalShield Member, you should contact your Provider Law Firm.

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