Collecting money from a lot of different people may not be easy at all times, so that you may start looking out for options. Luckily, there are options like hiring a debt collection agency or a collection law firm. Basically, both of them are governed by the same set of rules and work quite similarly as their basic function is to collect debts. Though they seem quite similar, functionally, there are differences between them.
Therefore, it is prudent to understand their similarity, differences, and the limits that both of these options have for a customer. In this way, an informed decision can be made on hiring a service as per need. In the following sections, we have analyzed them so that people can understand the differences between these two debt-recovery services.
· The amount to be collected
Both these services have their own minimum amount limit that they can recover on behalf of a customer. Debt collection agencies usually offer a minimum of $500 as compared to collection law firms that may not welcome anything less than $1,000. Anyway, there are some debt collection agencies that solicit accounts that owe as less as $25. It is because the primary work of these companies is debt collection. Comparatively, law firms tend to have a higher limit because their primary aim is to provide judicial services, and this service is additional for the clients.
· The fees charged
There is a clear difference between the fees charged by debt collection agencies and collection law firms for their services. While debt collection agencies usually charge fees as per the amount of work that they perform, collection law firms have a predetermined fee structure. For instance, debt collection agencies charge anywhere between 35 to 50 percent of the complete amount and the fees has to be paid by the creditor. In case of a collection law firm collecting a debt, the amount can be higher as both parties will try to gain profit out of the deal.
Hence, law firms generally charge fees that are in the range of 25 to 33 percent of the due amount. A collection law firm can realize its payment from the creditor, or it can charge the debtor for its fees. Generally, it does not charge the creditor unless a debt has been realized.
· Actions are taken
For realizing debt collection, both these debt collection agencies have completely different ways. Generally, debt collection agencies stay in touch with a debtor until the debt is cleared. The communication with the debtor can be by means of letters, calls, or emails. Even after being in touch with the debtor and doing the needful, if they are not able to realize the debt, then help from a law firm is solicited for the same.
Law firms have attorneys who are well-versed in court cases. They can submit the necessary documents in court and inform the debtor. These types of cases are usually lost by debtors so that after judgment, the needed steps can be taken for the recovery of debt. Usually, it includes accumulating profits from any available income, taking hold of the debtor’s earnings, and listing a non-exempted property among some other ways also.
· How fast can the debt be collected
The key question in recovering a debt is the time span that it can take to realize the dues. Debt collection agencies may take a longer time for recovery as they have to continuously be in touch with the debtor, and these agencies may be reluctant to take legal action through law firms. The reason for reluctance can be the fees that they may have to pay to the law firms, and that can decrease their profits substantially.
Alternately, law firms can help in realizing the money within a short time as they sue a debtor so that the debt can be recovered. From a debtor’s perspective, a debt collector can be ignored easily, but a notice from an attorney will have to be attended as the attorney can take the matter to court and create considerable problems.
The choice of selection completely depends upon a creditor. If the outstanding amount is desired within a short time, taking the recourse of a collection law firm can be an ideal way. However, if there are enough faith and patience on a collection agency, that route can also be tried out. Hence, depending upon the condition, either of them can be selected for recovery, but a collection agency will also solicit the help of a law firm if it is unable to recover the debt. Hence, it can be wiser to involve a law firm for debt recovery as the whole process can be made faster so that sufficient time and money can be saved .
Before making a decision, a reputed debt collection agency and a deft law firm can be consulted, and their services compared. The service fees involved with both of them can also be known in the process. Now, after carefully gauging all the areas and researching online on sites like Lifehacker and HuffPost an informed choice can be made so that debt recovery can be made smoothly within a small time frame.