Can Municipalities Benefit From Collection Attorneys And Agencies In Collecting Their Debt?

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Debt collection for municipalities is a lot different than most other non government collection procedures.  The truth is that a municipality, just like a regular business will need to collect on different services or fees associated with the area.  The problem is that a lot of municipalities do not have the funds necessary to hire people full time and that is when a collections law firm can be there to help them. 

Why It Is More Important Now

The federal and state governments have made severe cuts in the past which means that most municipalities have seen their budget cut.  They need to get the cash coming in from parking fees, fines, water bills etc or they may face a dire financial situation.  Defaults also increased as the economy took a turn for the worse making it more important than ever to have a firm that can be successful in collecting debt for them.

Bad Signs

The clue to look at in order to know how bad the payment of those fines and fees are is the amount of time that they have been without a payment.  A payment that is behind over 60 days is thought of as a high risk for non-payment.  If your municipality has a lot of those then you could be in the red for a long time because you still need to pay bills on time.  You may need to consider bonds or other ways to raise revenue.

Best Options

A collections firm is a great option to get money in from unpaid fines and fees because it is cheaper than hiring full time employees and they have more experience to get the job done right.  Another option is to hire the firm to handle not just collections but also billing so that there are fewer delays in the payments altogether.

When Using a Law Firm to Collect Unpaid Debts Makes Sense

Let’s face it—consumers who have failed to pay their debts and are who are past the point of worrying what it will do to their credit aren't going to always pay attention to collection calls and letters, particularly if they have lost a job, changed their phone number or moved.  In situations when you have tried every method of communication possible and the debtor still refuses to work with you, it might be time to use a law firm to collect on the unpaid debt, especially if the debt that is owed to you is a significant amount of money.  

  

First of all, a letter or phone call from a law office tends to carry a lot more weight in the mind of the debtor than a letter from a collection agency.  Since most collections agencies have their calls and letters on an automated process, while the communication might be sternly worded, most will not go through with judgments or lawsuits in order to receive payment.  A lawyer, however, is fully prepared to initiate a lawsuit on your behalf when the debtor refuses to pay or make payment arrangements. 

This is why lawyers who specialize in debt collection are more much more effective than a collection agency tends to be.  Therefore, if the debt is significant, you should hire a debt collection attorney.  When you do hire a lawyer, you should be prepared to show up in court and go through the entire legal process (including court fees and retainer fees) to collect on the debt that is owed to you. 

However, using a law firm is usually a last ditch effort because law firms often demand a 50-50 or one-third split of the collected debt.  Also, since lawyers tend to handle specific types of debt collection cases, it might be difficult at first to find the right attorney who specializes in the types of debt owed by your nonpaying clients. 

Commercial Collection Trends—Increasing Debt but Also Increasing Difficulty in Collecting It

Commercial collection trends have changed over the years, and at present, are experiencing a shift that is both good and bad for the industry.  The good is that as the economy continues to lack stability, businesses are failing—particularly those related to the travel and tourism industry.  With this decline in consumer activity, the commercial debt sector is increasing, with more accounts to collect on; the bad news is that these accounts are even more difficult to collect on than many personal consumer accounts.

 

According to a survey completed by the Commercial Collection Agency Association (CCAA), “the probability of full collection on a delinquent account drops dramatically with the length of delinquency.”  The examples they show are striking: after three months, the likelihood of collecting on a delinquent commercial account drops to 69.6%.  After six months, this number goes down even further to 52.1%.  After one year, the collection agency or debt collection attorney can expect a 22.8% probability that any money will be collected on that commercial account.

   

According to another survey conducted by CCAA, 80 percent of its members surveyed “indicated that they have experienced a decline in the collectability of accounts placed with them for collection.”  This, again, is a result of an unstable economy and might not taper to a more promising outlook for quite some time.  Since the economic downturn and recession of 2008, many small business owners who have been struggling to hang on by dipping into their life’s savings or personal retirement accounts have now reached the end of their cushion and are now simply unable to make things work for their business.   

While this certainly doesn’t mean the commercial debt collection sector is a waste of time, what it DOES mean is that commercial debt becomes just as difficult as personal debt to pin down.  Business owners are changing their business name or starting a completely different business, thus making it even more difficult for debt collection attorneys to collect on their old debt.