If your firm has unpaid accounts receivables, you can outsource the collection of these unpaid debts to either a debt collection law firm or a debt collection agency. However, it is important to understand the differences between these two entities and why you want a lawyer handling your debt issues. To learn more about the differences between a debt collection law firm and a debt collection agency, talk to a local attorney in your area today.
What is a Debt Collection Agency?
A debt collection agency is a business that specializes in collecting debts and often has agents that will collect debts as small as $25. Debt collection agencies often have a series of fees associated with their collection efforts, based on the work involved and the outcome of their services. The fees are typically based off the balance of the debt collected and can range anywhere from 35% to 50% of the overall collected balance. This fee structure can run even higher if the debt collection agency is forced to turn over the debt to a debt collection law firm. In addition, the age of the debt and the balance of the account can affect the fees charged.
In order to collect a debt, a debt collection agency will typically make continued, repeated contact with the debtor until the debt is paid. This can be through letters, phone calls, and in person visits to the debtor’s home and place of employment. Additionally, debt collection agencies can take months or years to collect a debt, especially if it appears that the debt will not be paid because it will mean paying a substantial fee for a debt collection law firm to take over.
What is a Debt Collection Law Firm?
A debt collection law firm is one that specializes in legal action to collect unpaid debts. Oftentimes, a debt collection law firm will require a minimum balance to accept work, typically at least $1,000. A debt collection law firm will often charge a set fee between 25% and 33% to take on the case, with some additional fees if the case has to go to trial. Debt collection law firms will assign an attorney to the case who will use legal means to try and collect the debt. This can include enforcement methods through the court or default judgments in cases. A debt collection law firm can garnish a debtor’s wages, place liens on property, and utilize other legal means that a debt collection agency cannot. A debt collection law firm is also typically quicker in resolving unpaid debts than a collection agency because they can file a lawsuit immediately to force payment.