There are many variations, and it often boils down to the debtor(s) did not pay. Maybe a loan was not repaid, or they did not pay for the product or service.
As a judgment broker, I talk to many business owners with a bundle of unpaid debts, asking for my advice. First off, we are discussing debts that have not yet been converted into judgments by winning a lawsuit. If you already have a judgment, you "just" need to get it recovered.
If you don't yet have a judgment, you have to choose what to do. Each debt or judgment stands alone, tied to a unique debtor. In fact, if you do not really know who your debtor is, collection might be very hard. If you cannot locate the debtor, and do not know their real name; or address, email, phone number, or anything else about them, the game is over, and it may be best to write off the debt.
The first step to collecting some of your money is to figure out what you know about the debtor for each unpaid account. If there are hints, reasonably follow up on those hints to find out what you can about the debtor. Then you have four choices: settle, sue, hire a collection agency, or give up.
1) Settling. It costs time and/or money to transform a debt into a judgment, and then to have a judgment or debt recovered. In many places, even small claims court costs hundreds of dollars to begin a lawsuit. Even when you get a judgment, to get any money back, you have to give up a lot - an average of 1/2, of what is collected. For this reason, settling might be a good option.
You need to spend hundreds to sue, and then give up between one-fourth and one-half of what is recovered, to end up with (usually) one-half. Because of this, a good starting settlement offer might be half. If your debtor is poor, it is probably a good idea to settle for much less, perhaps (20%|25%). The reason is, if the debtor is, and remains poor, it's going to be difficult and expensive to collect money from them.
2) Sue. Especially if the amount owed is big and/or the debtor is wealthy, suing is perhaps a great option to consider. When you win a lawsuit, you get a judgment, which earns interest and is much stronger than any debt. Of course, the judgment must be recovered, they do not recover themselves.
If you sue a debtor, be sure to get them personally served by a sheriff or a registered process server. Making sure that service of the lawsuit is perfect, making it harder for the debtor to vacate the judgment later. Once you have a judgment, find a judgment broker, a judgment recovery specialist, or a collection lawyer.
3) Hire a collection agency. This makes sense if you do not want to go to court, and/or have a bundle of small debts. A collection agency often makes calls, writes letters, and often gets the debt on the debtor's credit report.
Sometimes that is all a collection agency does. When the amount owed is large and the debtors appear to have assets, collection agencies often use an attorney to sue the debtor to get a judgment. Read the fine print, some collection agencies charge you extra if they have to sue.
4) Give up. Especially when the amount owed is under $500 and/or the debtor cannot be found, or they will not settle at any price. It's not cost-effective to sue for tiny amounts. Of course, if money is no concern to you, you could spend $500 on a private investigator to find them, $200-$600 to serve and sue them, then give up 50% to a judgment recovery specialist to get (at most) $250 back.
If your debtor is poor, giving up might be a smart move. Knowing when to hold them, and when to fold them, is good advice.
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Mark Shapiro - Judgment Broker - Free leads for Judgment Enforcers and contingency collection attorney.
http://www.JudgmentBuy.com - is the judgment super-site where Judgments quickly get Purchased or Enforced by the best!
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