Collecting Past Due Accounts: Giving a Debtor the Key

by Jim Finucan

Published on this site: October 6th, 2005 - See more articles from this month

When you decide to apply pressure during the collection call – by bringing up the possibility of taking legal action there are some points you need to remember. If your intent is to pressure the debtor into a corner you should also give him a way out. The key is getting him to cooperate with you in seeking a consolidation loan, liquidation or using assets he has on hand.

Unlike a loan, which can be checked on with a call to the financial institution, which made it, or a glance at the credit report, liquidation of an asset (the debtor sells something in order to get the money to pay you) is more difficult to track. Promising to liquidate an asset is often just another stall tactic.

"I haven't found a buyer yet."

Is the response of a debtor who is trying to put you off. If he does own an item that's worth something he should be able to use it as collateral for a loan and then use the loan to pay you. Let's say that, in response to your dun the debtor says he will have the money "in a few months," after he refinances his home loan.

"I have an audit on your account next week. I won't be able to get through that without recommending legal action. Do you have any judgments or garnishments against you at this time?"

"No. Hey, you aren't going to do that are you?"

"I don't have a choice. If I don't recommend legal action at that audit it will look like I'm not doing my job. Unless, of course, you can swing that loan this week so we can clear this balance. Then we can skip the audit. What do you think?"

Put the problem in the debtor's lap. His situation isn't hopeless; he isn't powerless. If he wants to stop any further action he can choose to do so. Handling the problem this way also takes you out of the position of being the bad guy.

If the debtor files a Chapter Seven (bankruptcy) you would receive notification from the debtor's attorney or the U.S. Bankruptcy Court. If bankruptcy has been filed look for the district in which it was filed, the date and the bankruptcy file number. If you file a claim with the bankruptcy court you may eventually receive at least a portion of what you are owed.

Incidentally, I do not recommend that you encourage a debtor to use a pawnshop to raise money from personal valuables. Taking this course can sometimes create legal problems.

Jim Finucan knows all about the dances, dodges and delays debtors will try to pull. Let Jim show you how to double or even triple the money you collect from your accounts receivable. Check out his unique collections manual "Past Due." For more information visit: http://www.tiare.com/pastdue.htm