A global debt recovery solution can never be the same. There are many factors that determine how complex it may be, such as the creditor’s relationship with the debtor. No doubt, the legal backdrop for collecting debt varies from one country to the other, but it is still possible to summarise a recovery solution in three integral steps.
Step #1: Amicable pre-legal negotiation
It can be difficult, expensive, frustrating and time consuming to negotiate with the debtor in order to convince them to make the payment. However, when it comes to debt recovery, this phase is necessary. Unlike taking a more aggressive approach, existing business relationships can be effectively protected through negotiation. Negotiating makes it possible to discuss problems, find compromises and resolve disputes. Of course, negotiating is not always easy and can be demanding, but it is still not as complex and expensive as beginning legal proceedings.
Step #2: Legal action
At times, the pre-legal phase can also become as frustrating as negotiating because it often results in debt instalments and/or debt write-offs. Moreover, negotiations rarely constrain the debtor to make the payment. Hence, if amicable attempts do not yield a worthwhile result, the next integral step is to take legal action.
Step #3: Insolvency
Longer proceedings increase the chances of discovering that the debtor owes other debts this also leads to the discovery that the debtor is insolvent. This is actually the worst-case scenario, but it is possible to deal with insolvent debtors through certain mechanisms. Insolvency cases have a very low recovery rate. Therefore, creditors should make sure that money owed to them does not remain unpaid for a lengthy amount of time. The more they wait, the more time the debtor will have to become insolvent. For instance, if a company goes insolvent, unpaid business transactions come after debt owed to financial organisations and tax offices since unpaid business transactions are regarded as unsecured debts.
By now, it should be obvious that the above three steps have an underlying logic. Basically that debt recovery becomes more and more complex and expensive as time passes and recovery procedures are prolonged, while it also becomes very likely for the debtor to have become insolvent. So, the best global debt recovery solution is to not avoid wasting time and to take immediate action, such as hiring a debt recovery agency or solicitor.