Debt collection is the procedure of chasing unpaid balances of various debts owed by consumers or companies to lending institutions. An agency that specializes in debt collection is called a collections agency or debt collection agent. Debt collectors are also called debt monitors, collection agencies, or credit repair specialists. Some agencies also advertise themselves as debt negotiators or debt officers. A collector has the authority to pursue unpaid accounts through all the legal methods available.
Collection agencies can use different legal practices, such as hiring third-party debt collection companies, to collect outstanding bills from consumers. These agencies have to be licensed by the Federal Trade Commission, and they cannot engage in any unfair trade practices. They are also not allowed to contact their clients after the collection process.
When the debt collection agency obtains a judgment for an unpaid account, they then become the creditor. They have the right to sell the unpaid balance to another creditor and the new creditor will be responsible for making the payment. If the debtor does not pay this debt, the agency has the right to send a garnishee letter or send collection letters to other creditors. Debtors may be pursued even if they have gone bankrupt or have no available source of income to make the required payment.
If the debtor fails to make the payment on old debt, the collection agency can contact the lender and inform them about the non-payment. The lender may have the option of taking legal action against the debtor. It may also ask the court to issue a garnishment order or may do it personally. A Covid-19 debt collection agency can file suit against the debtor if the court rules in favor of the collection agency. A Covid-19 debt collection agency is allowed to use all methods that are legally permitted.
Another reason why collection agencies work pro Bono is that sometimes creditors won’t admit to the debt being owed. The debtor can work with the county recorder in the county where the account is located and get a copy of the records. The debtor can also go to the Free Credit Report website and request a free credit report. However, a free credit report from the annualcreditreport website will not include federal debt such as student loans.
The main advantage of a paid agency over a free agency is that collection agencies have a proven track record of getting payments in a timely manner. Paid agencies also have the experience and know how to deal with creditors who are stubborn or reluctant to pay. Creditors do have options when they receive a garnish notice or a lawsuit. Some will attempt to negotiate directly with the debtor and some will attempt to go through a collection agency. However, in the long run, it is better to have a collection agency to do the job for you.