Collecting a debt can be a complicated process. Whether someone owes you money under a contract or you’ve obtained a court money judgment against someone, several tested tactics can get you paid. When it comes to collections, success requires an organized, well-managed, and thorough process. There are no secret tricks or little-known tips, although some ingenuity in obtaining information is helpful. Ultimately, collection success follows diligence and focus.
Here are ten of the most effective collections tactics, and how to apply each to increase your collections cash flow:
1. Use all the information you already have on your debtor
If the debt is from a contract or a loan, you probably have an application or some other preliminary documentation on your debtor. Loan applications ask for extensive contact and employment information, and while some of that information is part of an approval process, it’s also used for collections. Start with the debtor’s address and employment information listed on the application or other documentation.
2. Search online and on social media
Chances are, your debtor has some sort of digital footprint, and online information can be a source of contact information and other insight into the debtor’s affairs. Check social media accounts for the debtor, and then look for employment clues, or details on where the individual lives, works, and who they associate with.
3. Check those credit references
If you asked for credit references as part of a loan or rental application, this is the time to reach out to the listed people. In general, you can only ask these references information about the debtor’s location, and cannot discuss the details of the debt. Contacting references serves two purposes: it alerts the debtor (since the reference may contact them), and it can be the source of new information on the debtor.
4. Contact, contact, contact
Once you have some basic contact information from your documentation, online sources, or from references, begin a scheduled and persistent process of contacting the debtor. Begin with a phone call and a letter. Use certified mail with the first mailing attempt, as this can confirm a debtor’s address, and can be evidence that you alerted the debtor of the amount owed. Be persistent and firm, but also tell the debtor that you want to work with them to resolve the matter.
5. Uncover banking information
If you are collecting on a money judgment, you may be able to enforce the judgment using bank account garnishments, but the key to this tactic is knowing where your debtor keeps their money. You may have this information already from any payments the debtor may have previously made. Also, if you paid the debtor via a check, then see which bank processed the payment. Go back and check social accounts, too, your debtor may follow the social media feed of their financial institution.
6. Find out if the debtor owns a vehicle
Many state motor vehicle departments allow third parties to request information on vehicles registered to an individual. Like bank accounts, a car or other vehicle can potentially provide a source for payment.
7. Ask the debtor, and others, to provide information
If you have a judgment, you can invoke your standing as a judgment creditor to compel disclosure of information on the debtor. An information subpoena is a simple list of questions such as:
- Where do you bank?
- Do you have any cash on hand?
- Where do you work?
An information subpoena can also be sent to third parties, such as banks and certain individuals, to find answers to the same questions.
8. Offer a payment plan
It’s possible — likely, even — that a debtor hasn’t paid you because they cannot. Offering a payment plan may be a tactic to get some cash flowing and can create a more friendly relationship that can result in more payments. A payment plan can also take the form of a Confession of Judgment, which can speed up the process of converting the collection account to a judgment if necessary.
9. Be open to settlement
When it comes to collecting a debt, getting some amount is preferable to getting nothing. Use the information that you have collected to assess whether or not the debtor has assets or means to pay the debt. Extend a discounted offer to accept a smaller sum in full, and reduce the amount of your losses.
10. Hire professionals
Professional debt collectors know how to orchestrate all that’s required for successful collection. They often take a percentage of what they collect, so there’s little or no out of pocket expense. They know all these tactics and more and can help manage the process and guide you to more money.