The term debtor refers to a person who has a debt or owes a bill to a certain company or agency, and the person becomes a debtor due to some circumstances that make them unable to pay their debts as established in the agreement. Some of the reasons include accidents that cause an individual to be unable to work, job loss, or any other unforeseen event that may affect their lives.
In business cases, debtors include corporations, property owners, or business owners who borrowed money for their business. In cases where the debtor is unable to pay, incurs overdue accounts, or fails to meet payment terms, these creditors will then send the debts to a collection agency. Once received, the collection agency will carry out all the necessary actions to achieve payment from the debtors. Collection agencies earn from a certain percentage of the money collected from debtors. These collection agencies are subject to government laws to prevent the agencies from abusing their clients. The laws governing collection agencies differ from country to country.
Another option that has been developed in the United States is the purchase of debt. This system has grown tremendously as a profitable industry. Creditors sell your debts to these companies to earn some income from your accounts receivable and to avoid further legal claims arising from debt collection. Debt buying is also gaining popularity in Asia, the UK and the European region.
Almost all debt collectors at a collection agency are trained and motivated to ensure the successful collection of payments. The most common method used is to call the debtor by phone. Collectors are trained to positively persuade debtors to make payment. They are insistent without being overly demanding.
The US government, pursuant to the Fair Debt Collection Practices Act or FDCPA, does not allow calls to any debtor if the call charge will be charged to the debtor. If the collector has been able to talk to the debtor, he will do his best to establish a good relationship with the person or business that has a debt and will try to provide some solutions by offering alternatives. The offer may be some type of discount on the amount to be paid or a longer payment period.
Collectors can call any of the debtor’s relatives and neighbors to confirm the exact address of the debtor, but they must never reveal information about the debt. In addition, the collector must be willing to provide their full name and employer when necessary.
In the United States, collection agencies sometimes request the services of a collection attorney. The lawyers will take care of filing debt collection lawsuits in the respective courts on behalf of the collection agency.
Once the lawsuit is filed, the debtor will be served with court papers. In some cases, a deputy sheriff will do the job. Upon receipt of the demand, the debtor must take action. If the debtor does not respond on the date indicated, the court will issue the default judgment in favor of the collection agency.
The judgment in favor of the collection agency’s attorney will entitle the collection agency to take the necessary steps to collect payment from the debtor.
The most common method used as a result of the court’s decision is by garnishment of the debtor’s wages. This will be done by court order of attachment to the respective employer of the debtor. The employer will automatically deduct from the debtor’s paycheck a certain amount that will be given to the court and then passed on to the collection agency’s attorney.