When Collectors Take Action: What Are the 8 Stages of Debt Recovery?

Men and women don’t accumulate debt overnight. Typically, it creeps up on them over time. They may lose their job, face a costly medical crisis, or end their marriage. Situations such as these can lead to bills piling up, and the person might try to stick their head in the sand and ignore them. Their creditors will not do the same, however. They want the money they are owed and will take steps to secure the funds. What is the debt recovery process?

What is Debt Recovery?

When a creditor pursues funds owed to them, they will carry out certain actions. As the process moves forward, the actions tend to become more aggressive. This debt recovery process involves many steps, and a debtor needs to take action early in the process. When a debtor feels overwhelmed and like they cannot resolve the situation, they may wish to seek help from Debt Legal Defense.

The Steps in Debt Recovery

When a debtor misses a payment, they will receive a friendly reminder the funds are due. This may come in the form of a letter, an email, or a phone call. If that doesn’t work, an overdue payment reminder is sent, and this may appear on the debtor’s credit report. If it does, this could hurt their chances of securing credit in the future.

If previous communications have been ignored by the debtor, the credit sends a final notice request before the creditor begins calling and sending letters demanding payment. When the default notice letter is sent, this means the creditor will pursue legal action if the debt isn’t paid within 14 days.

At this time, the creditor could choose to turn the account over to a debt collection agency. These agencies may be willing to negotiate a payment plan with the debtor, so it never hurts to ask. However, they are known for using aggressive tactics to get debtors to pay. Every debtor needs to know their legal rights if the debt recovery process gets to this stage.

If legal proceedings are initiated, the debtor may face a judgment. If this is handed down, the debtor has 14 days to pay the bill. This bill will often include court costs and more. A failure to pay could lead to your wages being garnished and more. For this reason, every person needs to take action before the process reaches this phase.

Steps a Debtor Should Take

Any person struggling with overwhelming debt needs to take action right away. Many options remain open to men and women who find themselves in this situation. The first thing a person should do is determine how much they owe, who they owe the money to, and when each payment is due. Sadly, many people fail to have this basic information and that is why they end up with debt issues.

When a payment must be missed for any reason, contact the creditor and explain the situation. If they know what is going on, they are more willing to work with the debtor to find a solution agreeable to all. This may be a reduced payment for a period, a missed payment that will be caught up later, or another option completely. However, they cannot work with the debtor if they don’t know there is a problem. Communication is key at this time, so remain in contact with creditors. Doing so helps to prevent further action from being taken and helps the debtor get back on the right financial track.