If you are worried that a debt collector will soon contact you because you failed to pay some of your bills, you probably have questions brimming in your mind about the whole collection process.
In this article, we will inform you how debt collection works so that you can understand the perspective of a debt collection agency. Having knowledge about the process will make you less stressed and teach you how to deal with the situation.
Process of debt collection
Often debt collectors work for debt collection agencies, but some operate independently. There are some collectors who are attorneys as well. Sometimes these agencies act as a middleman between the customer and creditor. After successfully collecting the debt, the creditor pays between 20% to 50% of the amount collected as a fee. Debt collectors collect delinquent debts like medical bills, credit card dues, personal loans, student loans, business loans, cell phone bills, and more.
Debts that are hard to collect, some agencies negotiate with the customer for less than the amount owed. Debt collectors can also file a lawsuit against the customer if they refuse to pay the agency.
Agencies That Buy Debt
Some agencies buy debts from a creditor. If a creditor determines that they will not be able to collect the debt, they will sell that debt to a debt buyer. A creditor packages numerous defaulter accounts and sells them as a group.
A debt buyer often buys these packages through a bidding process. Ones that are older than 1 or 2 years cost less because they are less likely to be collected.
The type of debt plays a major role in the price as well. For example, a personal loan debt will cost more, while a phone bill will cost significantly less. Debt buyer keeps the money collected by them because they took the risk of buying that debt from a creditor.
What Debt Collectors Do?
A debt collector can use phone calls, messages, e-mails, and letters to remind and convince the customer to pay their debt. If the debt collector fails to reach the customer, they use computer software and conduct a private investigation. They also search for the assets owned by the debtor such as bank accounts to check their repaying ability. Collectors can also report to credit bureaus to try and convince the debtor to pay the amount because it can affect credit score negatively.
A debt collector cannot seize a paycheck or ask the bank to pay from their account, hence the only option they have is to convince the debtor to pay. The one final option they can use is to get a judgment from a court. This means the court has ordered a debtor to pay a certain amount to a creditor. Using this judgment, debt collectors can start collecting money from their wages and bank accounts.
This how the whole process of debt collection. So, if you are contacted by a debt recovery Netherlands agency, don’t worry. Just try to work with them and pay off all your debts.