The Ripe Time to Turn Over Collections

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As a creditor it can be difficult to know when it is the right time to turn an account over to collections. Even though your collections efforts may not be coming to fruition, you may have several reasons for not wanting to turn an account over to a collections agent right away. You may not want to spend the extra money on outside collections, or you may simply want to have faith that your clients will eventually pay the debt you are owed. However, at some point you have to face reality and know that a collections agent is required.

But how do you know when the time is ripe to turn over an account to a collections agent? There are several key factors that can help you determine this. First, consider the response you have had from your client. If your client has completely ignored all contact regarding the matter for several months, you need to enlist the aid of a collections agent.

Another thing to consider is how much time your company is spending trying to collect the debt. Time is money. It may be more cost effective in the long run to hire someone to collect the debt for you.

Finally, there are many times during the year that is the best time to turn an account over to collections, because there is a possibility of an influx of money. If your client is a student, there is a good chance that they receive loans and other funds around the end of December and the end of August. These are good times to try to collect on the debt.

Another great time for anyone to collect on a debt is during tax season. People often begin filing their taxes as early as February if they know they will be receiving a refund. Starting the collections process in February and going on strong through May or June will guarantee that you catch your client with their tax refund in hand. At this point, if they do not pay the debt, you know they have no intentions of doing so.

In the end, any time can be the ripe time to turn an account over to a collections agent. It all depends on your resources and your company’s policies on how long a debt can remain unpaid before you take action. Most certainly any debt more than six months old should be sent to a collections agent. These agents can often have the means to collect on a debt that you yourself cannot obtain. 

What is the statute of limitations and how it affects your rights to collect a debt?

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The debt collection statute of limitations refers to the length of time that collection agencies can continue to legally pursue unpaid debts. This means that unpaid debts have an expiration date, after which collection agencies have to stop with their collections activities.

The period of time that may elapse for collecting a debt varies from state to state, but it should not be confused with the credit reporting time limit. These are distinctly separate and distinct issues.

Debt Recovery Statute Of Limitations Time Period

Remember that the debt collection statute of limitations time period starts from the last reported date of activity on the account. This date is shown on your credit report. This is a completely different date from the date the account became overdue.

Account activity can include making a payment, entering a payment arrangement or agreement, and even promising to make a payment.

For example, should a customer elect to make a partial payment, this can effectively reset the time frame back to zero on the day payment is made. Debtors who intend to avoid paying their bills altogether may avoid making any contact whatsoever. These delinquent customers know that by letting the debt collection statute of limitations clock run out, then the window of opportunity for collecting the debt has passed.

How Can The Debt Collection Statute Of Limitations Assist Business Owners?

When business owners understand how the debt collection statute of limitations works, they can start to use these rules to their advantage and help in their debt collection strategies.

Learning how to encouraging late paying customers to make partial payments, payment arrangements or enter into a payment agreement can restart the statute of limitations time clock over again can be a great tool to lengthen the amount of time you have to collect these past due delinquent accounts.

This can also force business owners to rethink their past due debts and take action. When you know that you have a limited window of time in order to collect an unpaid debt, you might reconsider your debt collection efforts. You may even decide to outsource to third party collection agencies to help you recoup your debts sooner rather than later.

What Is Included Under The Debt Collection Statute Of Limitations?

Debts such as child support, income taxes, or federal student loans are not covered under the debt collection statute of limitations, so they will continue to be owed regardless of the amount of time that has passed.

However, most other types of credit agreements are covered.  If you're in any doubt about how the debt collection statue of limitations may affect your own debt collection strategies then it's important that you contact third party collection agencies to help you navigate through your rights.