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An Overview On Debt Recovery

 July 14, 2014  /  Comments Off on An Overview On Debt Recovery

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Debt recovery is the collection of an outstanding debt from a debtor who can be either an individual or a company. If you are a creditor, there will always be brewers who owe you money and chasing that money can be quite unpleasant at times. Negotiations between the debtor and creditor are the quickest and easiest way of formulating an amicable solution for defaulted payments.

However, there are instances when defaults in payment leave the creditor with no choice expect to seek legal action. Below is an overview of debt recovery when and what legal channels are involved.

An Overview On Debt Recovery

Debt Recovery Law   

Every country has a debt recovery law in place, which not only protects the creditor but also the debtor. The law aims at ensuring that creditors recover their money as well as protects debtors from being harassed. According to the law, creditors have the right to claim their money, but they should refrain from using threats when demanding payment, trying to collect interest on a debt, or falsely accusing someone of having a debt.

This law covers personal, family, and household debts, which include money owed to a personal credit card account, an auto loan, medical bills, and mortgages.

Ways Of Recovering Debts

A creditor has several legal options of asking a debtor to pay up. These options involve the creditor using debt recovery agencies. These agencies normally send letter/notices to debtors asking them to pay their debts failure to which they will receive bad credit ratings and be taken to court to have the debt enforced. These agencies include;

  • First-party recovery agencies:

These are subsidiaries to the company being owned the debt. Companies which usually lend out money a lot of times have a branch that is regulated with the task of collecting debts. The debt collection division normally tries to work out a solution and is willing to compromise so as to get their money and retain the client.

  • Third-party debt recovery agencies:

These are collection firms, whose main role is to help creditors recover debts. Such agencies are referred to as a ‘third-party’ since they are never present at the time of lending and have nothing to do with the contract between the debtor and creditor. Collection firms are hired on consignment basis. As such, these firms receive payment for a certain percentage of the debt only when it has been recovered.

  • Selling the debt:

Creditors also have the option of selling debts to a debt recovery agency at a fraction of the total cost of the debt. Once a debt is sold, the creditor automatically absolves him/herself from the debt, after which the debt recovery agency goes after the debtor to demand payment.

Restrictions For Debt Recovery Agencies

Debt recovery laws do not allow collection agencies to:

  • Use threats, obscene language, or violence when asking for debts.
  • Call or meet debtors at unusual times and places which are inconvenient to the debtor.
  • Forcefully seize or sell the debtors property without the consent of the court.
  • Send debtors illegal documents and claim that they are legal.

Andrea McKenzie has written several articles offering information on how debtors can protect themselves from being harassed by collection agencies as well as what steps a creditor can take to recover a debt. If you are looking for a reliable partner to help you recover a debt, Andrea highly recommends you visit this link, http://www.djpsolicitors.com/.

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  • Published: 3 years ago on July 14, 2014
  • Last Modified: July 14, 2014 @ 8:30 am
  • Filed Under: Finance, Legal

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