Business ownership comes with its many perks. The sky’s truly the limit in terms of how much you can make. Unfortunately, business ownership comes with some downsides, too. One of those is when your customers or clients don’t pay their bills.
Most business owners initiate debt collection efforts in-house. If their efforts fail, they must weigh whether to work with a debt collection agency or collections attorney.
Why do companies work with debt collection agencies?
Debt collection agencies are happy to take the process of collecting on your bills off your shoulders, but federal law prohibits them from posing as an attorney. They can only send your clients letters, call them or place the debt on their credit report — but they lack any other authority. The chief benefit in hiring them is that you don’t have to do the work yourself — which lets you focus on your business.
Debt collection agencies often work on a contingency basis, meaning that they only get paid if they collect what a customer owes you. They may sometimes assess their clients a percentage or a flat rate fee depending on the size of the debt.
Why companies hire collections attorneys?
Working with an attorney can fast-track the debt collections process for your company, especially if there’s a possibility you will have to escalate to litigation.
Collections attorneys generally only collect debts meeting a certain minimum threshold. These lawyers often assess their creditor clients a fee that equals one-third of the debt to recover or assess an hourly fee to collect a debt. You may need to pay additional court fees to have a collections attorney collect your customer or borrower’s debt.
Which should you choose?
Generally speaking, a collections attorney has more leverage to bring on your behalf. When you need aggressive collection action, it’s generally wisest to speak with an experienced advocate.
