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When Should My Business Begin Collection on a Bad Debt?

Many businesses have concerns about the bad debt collection process. It is imperative that businesses know when to begin collection on a bad debt. This can be challenging. Each customer’s debt is unique. Business owners in the Atlanta area can seek a debt collection attorney to advise them on collection laws in Georgia.

Some companies have internal collection policies in place. The policy may initiate the collection process after a debt is older than 60, 90, or 120 days. In most cases, the customer has not responded to previous attempts to collect the debt.  Typically, a company should look out for three areas that should prompt them to begin collection on a bad debt.

When to Begin Collection on a Bad Debt

  1. Slow or no pay – Typically after the customer has been late for a significant amount of time, the business should begin collection on a bad debt with additional internal collection activity.
  2. Broken payment arrangements – Usually, when a customer’s account is in a delinquent status, the company may make special payment arrangements to accommodate the customer’s specific situation.  This normally includes lower payments with a longer period of time to pay off the debt.  When the debtor does not maintain this arrangement, the business should begin additional internal alternatives to secure the debt.
  3. Non-responsiveness – When a customer does not respond to attempts to collect the debt, the business should send demand letters and make additional calls. But if the customer does not respond to any of the methods above, the business should seek outside help from a reputable collection agency.

What are the Next Steps to Collecting on a Bad Debt?

When a customer does not respond to collection attempts, the business can write off a likely bad debt. The business can also send it to a qualified debt collection law firm. However, in a normal debt collection situation, the proper time to begin collection on a bad debt is usually after the company has internally made several attempts and has not gotten a favorable response from the customer.

There are situations when a business retains a debt collection law firm rather than a debt collection agency.  A debt collection attorney in Atlanta can enforce the debt collection laws in Georgia when they begin collection on a bad debt. According to the Georgia state laws, collection efforts can include bank and wage garnishments and sheriff levees or judgments. These methods may result in seizing the debtors real or personal property. An attorney could advise and oversee this process.

The Debt Collection Method Guidelines

The Fair Debt Collection Practices Act (FDCPA) governs the debt collection process. This law states that collection methods can be carried out, but the methods must be restricted. Additionally the ACA International has a mandatory requirement that its members abide by all laws and regulations with respect to code of ethics concerning collection methods.