How does Commercial Debt Collection work?

Debt Collection Processes

Commercial Debt Collection comes into force when a creditor's attempt to recover his dues from a debtor fells on deaf ears. The commercial debt collection involves obstruction of an agreement between two business entities. The creditor, in this case, should use the necessary tools under the law to recover his dues.

The law differs from state to state on how a creditor can collect his dues, but there is a universal standard that a creditor can follow in such a situation. First, the creditor is allowed to involve a debt recovery or collection agency to collect their dues on their behalf. Secondly, a creditor can decide to sue the debtor by filing a lawsuit in a commercial dispute court. In this case, the court will compel the debtor to settle the debt or spell out some recovery measures to be followed by the two aggrieved parties. The third option a creditor has is selling the debt to a debt buyer.

Out of this, most debt collections involve a debt collection agency. This agency collects debts and remits the amounts received into the accounts of the creditor. In return, they are rewarded by taking a percentage of the debt accumulated, mostly 25 to 50 percent.

In some cases, the debt collecting agency may hit a snarl and fail to reach an agreement with the debtor. They have an obligation by law to start negotiations and come up with plans for debt reductions. These plans are binding and must be adhered to by both parties. In extreme situations, when all avenues are not working, debt collection agencies can invite court indulgence in compelling the debtor to honor the agreement.