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Hello all,

 

I wasn't sure if I should post this here or in the bookkeeping area, so please forgive me if I'm wrong. I just have a couple of questions about collections. Has anyone ever used and collection agency and if so what was the process and was it beneficial? The other question is has anyone ever reported a client to the credit bureau or Dun and Bradstreet?

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Collections agencies typically buy the debt for pennies on the dollar and then collect the money themselves charging the person who owes you the money add'l fees for the account being in collections. In other words, if someone owes you $500 then you will sell that debt along with the paperwork that proves they owe the debt (contract, agreement, notices that you sent when they agree w/ you that the money is owed, etc.) for let's say .50 on the dollar, so you would get $250. They would then collect the $500+ and you are out of the loop and get nothing more.

 

In the State of TX you can file a lien against someone who owes you money at the county clerk's office. I'm not sure if that includes all commercial debt, but the filing fee is small (I think it's only $25 -may be less-haven't done it in a long time) It places a blackmark on their business and their business credit history and you only have to do one thing. Then you can keep harrassing them to collect the debt after they see that you placed the lien. They will receive notice by being served by a Harris County (or Fort Bend) sheriff. This has always worked when I had to do it in the past and they typically pay immediately. If they don't you can request that items be taken from their business to pay the debt. I have seen this done. Again, it would depend on what type of business they have (corp or sole prop) and would depend on the amount of the debt and what kind of debt it is.

 

If they are not in TX, then it would depend on what state your contract with them was drawn on. I personally would never use a collection agency. I do collections for my clients (& for myself if needed) but I don't buy their debt, I collect it on behalf of them. Collection agencies are for people who are willing to throw in the towel and get a partial part of what is owed to them. Granted it may be worth your time & effort to collect some instead of working to get all.

 

Of course, all of this matters only if you did your due diligence before hand and have a signed contract and can prove they owe you the money. Lots of items can come into play....not sure what they owe you for and how much the debt is and what state your contract is from. If it's a huge amount of money then you may want to ask the attorney who did your contract.

 

Hope that helps!

Good luck!

K.


Kris Stanley-Price

KSP Accountants & Assistants

www.accountantsandassistants.com

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What has been said about collections agencies buying debt is true, however, in New Mexico you have to have a certain amount owed to you before they will take on the debt. I checked into it when I sub-contracted last summer and she was owed $1500 which was not enough for any of the agencies here (New Mexico). They advised me to go to small claims court for restitution.

 

You'll have to call the collection agencies where you are to see what their criteria are. Good luck to you!

 

LindaQ

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Collections agencies are one of my target markets and not ALL the collections agencies purchase the debt. Most collection agencies charge a percentage. Usually somewhere between 20% and 40%. It's called a contingency fee.

 

The proper name for the agency is a 3rd party contingency collection agency. Someone who buys debt can also be called a collection agency, but they are first party once they own the debt and are generally called debt buyers or debt purchasing agencies.

 

So as you can see, you can use a collection agency who only charges a percentage and doesn't actually purchase the debt. It really just depends on what your needs are.

 

Tracy

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