How to Collect Debts

It’s easy to lend money, but sometimes it’s hard to get it back. And at such times, you should not feel guilty about debt collection: it is the other person who broke his promise. Regardless of the cause of the loan, there is always a way for you to handle when someone owes money and won’t pay it back. Sometimes, just a gentle reminder is enough. However, being willing to increase the intensity of your actions will help you achieve your goals and reduce unnecessary distractions.

Table of Contents

Debt payment request

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Identify the point when you no longer trust the other person to automatically pay. If a specific due date isn’t mentioned in the original agreement, decide for yourself: how likely do you think the person will pay off on their own without a reminder?

Consider loan value. A small debt may not be worth insisting on immediately, and a larger debt may take a long time to collect.
If someone owes money for a business transaction, claim it as soon as possible. Waiting only makes things more difficult. ^{[1] X Research Source}

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Ask about the debt politely. When it’s overdue, ask the other party to repay the debt. At this stage, all you want is to make sure the other party is aware that their loan is still unpaid. Sometimes people simply forget about the debt and just need a reminder of goodwill. More formally, this is also known as an “offer to pay”.

Instead of asking for payment, remind the person (“Do you still remember the money you have?”) to save face.
Provide all relevant information when inquiring about the debt. You should be ready for a reminder of the amount lent, when the final payment is received, the amount owed, any loan agreement you are willing to accept, contact information, and a deadline. Clear payment.
When dealing with a company or client, a formal letter can be helpful. That will be the written evidence needed when the situation escalates.
With a maturity date, usually 10 to 20 days from receipt of an offer is a reasonable timeframe: not too long, but not close to causing panic.

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Determine the acceptability of other forms of payment. Is it worth the wait? If it’s just a small amount or if you don’t have confidence the other party will pay off the debt, consider allowing them to pay it back with something else – offering some service or favor is a reasonable solution. if you feel the deal is acceptable. In this case, clarify the replacement offer and get it back as quickly as possible.

Do not accept negotiations too quickly, because in many cases, that will be a signal that the debt can be negotiated, or that the borrower may even extend it for more time. ^{[2] X Research Source}

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More powerful with “request to pay”. If the borrower does not respond, you should be more direct. Make sure you’ve clarified your expectations of immediate payment, defined your payment obligations, and provided specific refund instructions.

The language used should be more direct and show some urgency. Phrases like “You need to pay now” or “We need to reach an agreement on this” will show the borrower that you are serious and not willing to negotiate.
When requesting, state the consequences of non-payment. Let the other party understand what your intentions are and be ready to implement them.

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Debt collection is getting more and more aggressive. If the request for payment doesn’t yield any results, chances are that the other party either doesn’t have the money or simply doesn’t like to pay. Your job is to get priority by phone, letter, e-mail or face-to-face: get them to pay you before they pay someone else (or run away).

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Use a debt collection service. This move shows you are serious and at the same time, saves you the hassle of contacting and arranging payments. The collection agency may charge a fee of up to 50% of the amount due. Therefore, before deciding to use the service, you need to determine whether it is better to get a piece of it than to get nothing. ^{[3] X Research Sources}

If the cost is too high, you may want to consider skipping this step and going to the competent court.

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Know where the limit is. When it comes to self-collection, certain practices may be illegal in your locality. If you are in the US, federal law may apply if you are considered a debt collector under the federal Fair Debt Collections Act. Chances are, you still need to comply with local laws. While local laws may vary, in general, the following strategies should be avoided:

Calling at the wrong time;
Additional fees incurred;
Deliberately collecting money late to increase fees;
Disclose information about the debt with their agency;
Lying about money the person owes;
Making bogus threats. ^{[4] X Research Sources}

Arraign

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Make a lawsuit file at the district court where the defendant resides and works. Research your local law or court website to learn how to file a lawsuit. The statute of limitations for initiating a lawsuit is 2 years from the date of realizing that their lawful rights and interests have been infringed. If you’re in the US, go to a special small-loan court with a value limit of between $2,500 and $25,000, depending on the state. ^{[5] X Resources} You can find the website, state court statutes through the exact link from the [table of contents] page of the National Center for State Courts.

If sued, prepare for your trial. If you have a contract, promissory note or any other document to prove it, have enough copies available for the judge and the debtor or their representative. Do the same for any other supporting evidence.
This can be a very drastic step. Make sure the debt is worth the hassle of appearing in court. If the other person is a friend or relative, this step will definitely have a negative impact on your relationship.

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Apply to a higher court. If unsuccessful or denied permission to apply in district court, go to higher court. Consult or hire an agent, fill out the correct form, and prepare to go to court with all the necessary paperwork you can gather.

Considering court and attorney fees, this option is often more expensive. But if it’s successful, it’s probably worth choosing over a debt collection service. ^{[6] X Research Sources}
Threatening lawsuits may have been enough to get someone to pay. However, you should not threaten if you don’t really mean it.

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Apply for a subpoena. Once a judgment has been reached against the debtor, you can apply for a subpoena on the grounds that the other party does not pay, disregarding the court’s decision. Along with the notice to appear in court, it is enough for the court to schedule a hearing and force the defendant to return, explaining the reason for the outstanding debt.

At trial, you should ask for the defendant’s right to forfeit wages.

Get paid

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Collect money. After the prompts, claims and lawsuits process, the debtor will be forced to pay. Sometimes just asking is enough. There are times when you need extra court enforcement steps to get your debt paid in full. It could be an enforcement order or a lien.

If you have to sue and hire an attorney, you should consult with them to take the most reasonable steps.

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Identify the debtor agency. Once the court has granted control over wages, it is your responsibility to identify and locate the other party’s agency. The easiest way is to ask the debtor directly. If they don’t want to talk, you may need to submit a set of interrogation questions – questions that must be answered in writing under oath in court. Check your local court’s website for a sample of the required documents.

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Sent to the other party’s employer. Once you’ve found their current employer, you’ll need to submit a questionnaire to confirm that the borrower is currently working there and that their salary hasn’t been forfeited to the limit.

Advice

Don’t feel guilty about reclaiming what’s yours. You do not swallow. The borrower did and you have every right to get it back.
Remember to stay calm and don’t let yourself get upset. New debtors should be upset because they have not fulfilled their repayment obligations. Be firm but polite. It will increase your chances of success.
If payment is extremely difficult for an individual or business, be very cautious when dealing with them in the future.
Keep all paperwork on file during recourse, especially if you have to go to court. With business transactions, keep legal records when possible.
In this article, the debt collection process is presented for informational purposes only. Remember that each type of paperwork that needs to be completed can vary widely and follow a heterogeneous process. Do your due diligence before filing a lawsuit or hiring an attorney.
If you own a small business or are an independent contractor, you may need a different approach when dealing with non-paying customers.

Warning

If you’re in the US, with business debt, make sure you go through the federal Fair Debt Collections Act (https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair- debt-cplection-practices-act-text) and any other applicable laws. Otherwise, in the end, you may end up being the guilty one.
Be careful about disclosing to anyone that he or she has not paid you, because you may be charged with slander or libel, as the case may be.
If the debtor files for default, you must stop collection efforts immediately to avoid default and government collection laws.

Steps

Debt payment request

Arraign

Get paid

Advice

Warning

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