Debts are an unfortunate part of running a business. While it would be ideal if all invoices were paid on time, the fact remains that from time to time, people will default. When this happens, you have several options available to you. We want to go through each of these options in turn and explain the advantages of each so that you can make an informed choice.
At AANDI Lawyers, we are committed to getting the best possible outcome for you, no matter the situation. If you are grappling with an unpaid debt and need legal assistance to get it cleared, contact us today on [phone].
Key tips for managing unpaid debts
We just wanted to mention this from the outset; whatever you do with debt collection it is best to take action promptly once you have decided which option is best for you.
The longer you wait to collect on a debt the harder it can be. Note that a debtor who has remained unpaid -despite your best efforts to date- may also owe money to other parties. So, it is highly desirable that you make your interest known as soon as possible.
What are my main options for debt collection?
When approaching an unpaid debt, you have a couple of choices available to you. Which option you choose will depend on a couple of factors, but will be determined principally by the size of the debt owed.
Hire a debt collector
A debt collector will usually operate on a commission basis, where they will chase down your debt for you and recoup a portion of the sum owed as their fee. The amount that debt collectors charge may vary, but an industry standard is around (15-20%) of the total debt owed.
Engage the services of a lawyer
When engaging with a lawyer, they can act on your behalf and send the unpaid debtor letters and provide options for your debtor to repay. They can also enter into negotiations if there is a dispute about the total amount payable, or the amount payable for services or goods provided.
Waive the debt
In most cases, this is not an option unless the debt is very small and the hassle of chasing it up is worth more than the debt itself.
Advantages of hiring a debt collector
There are a range of benefits to working with a debt collector. One of the main reasons why business owners will choose a debt collector is because the size of the debt owed is not sufficient to warrant legal action. Some other advantages of working with a debt collector include:
- Speed of recovery. When working with a debt collector you will likely be operating with someone who is on a commission basis. This means that they will be enthusiastic about recovering the amount you are owed as quickly as possible so that they too can receive payment. This is of particular benefit if you are experiencing cash flow issues.
- Cost. The cost of hiring a debt collector may be less than working with a lawyer – but this of course, depends on the size of your debt and the recalcitrance of your debtor.
- Control. When working with a debt collector they will take over the entire debt collection process, from sending letters and making phone calls through to any negotiations that you are willing to enter into about the final amount.
- No Win, No Fee. This does tie in to cost but it’s a consideration for people, again with smaller debts which are owed. With a debt collector they will not demand payment from you until they succeed in recovering your debt.
A key reason why people work with commission-based debt collectors is because their debts are on the small side, and because legal action is not necessary. Recovering a debt minus commission, if the alternative was not to recover at all, is still recovery.
Advantages of working with a lawyer
Lawyers have the capacity to do everything that your debt collection agency can do, and they can commence enforcelegal action. If you are dealing with a large debt or working on a situation where payment hinges on the resolution of a dispute, it is likely best to engage the services of a lawyer.
- Dispute resolution. Working with a lawyer means that you have access to professional dispute resolution experts who can conciliate an agreement between two parties. If you are being denied payment due to a dispute and believe that you have a contractual case in your favour, then a lawyer can help you manage this.
- Beat debtors at their own game. While debt collectors may appear threatening, the truth is that there is no power for debt collectors to force debtors to pay, and nor can debt collectors enforce interest. Lawyers on the other hand, have the capacity to take matters to court and to enforce judgements which can result in the payment of interest.
- Value for money. When you work with entities like AANDI Lawyers who specialise in debt collection and recovery, you receive service from a trained professional. Our lawyers understand debt recovery, contract law and commercial remedies which means that they can advise you on whether you can seek compensation for delayed payment, and whether it is worth taking legal action.
Larger debts, contract disputes and serial debtors all call for the services of legal professionals who understand the debt collection space.
Lawyer vs Debt Collector: Which one should you choose?
Whether you choose to engage the services of a debt collection agency or a lawyer, the decision will likely come down to the size and complexity of your debt. The decision is yours, but just remember that when you work with a lawyer you benefit from their knowledge about a range of areas of law. We can advise you on the best course of action to pursue and can provide representation if your debt collection matter does proceed to court.
Wondering where you stand? Contact us today for a complimentary discussion on [phone]. We can let you know what your options are and what your best course of action will be.