Why the Old Debt Collection Letter Doesn’t Work Anymore

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Decades ago all a debt collector had to do was send along a letter to their prospect, letting that prospect know what they owed and when they owed it by, and that letter would generally do the trick. These days, the debt collection letter just doesn’t work anymore. Not only are you unlikely to receive any money back from any debt collection letter you send out, but there’s a low chance your prospect will ever even read your message. There are a couple of big reasons for this change.

First, you are less likely to have an accurate address where your prospect can be reached. People move around a whole lot more these days than ever before, and as a result it’s likely your prospect no longer lives at the address you would send your letter to in the first place. 

Second, even if your letter is received by your prospect there’s a good chance they will just ignore it, or even shred it. It’s easy to blame this on apathy or discourtesy, but it’s more likely due to the fact people just receive so many messages every day they’ve grown used to simply ignoring what doesn’t interest them. Tack on the fact most people don’t want to respond to a collection letter and you have a recipe for never being read, no matter how many letters you send.

Finally, people just don’t take collection letters very seriously these days. They know that a letter is just a letter, and they are accustomed to receiving more serious forms of pressure from debt collectors, such as phone calls, emails and other more forceful forms of communication. In the big picture, a collection letter is inconsequential to today’s prospect.  

The Proven Formula for Locating Debtors

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Lenders are constantly faced with the unfortunate reality that plenty of their debtors will attempt to go off the grid to avoid the responsibility of paying back their loan. While many lenders have procedures in place for collecting from debtors who are easy to find and contact, most lenders find themselves powerless to track down and elicit payments from debtors who have skipped town. Yet just because a case is difficult for a lending agency doesn’t mean it’s impossible for a professional collections agency.

Debt collection agencies and debt buyers develop proven formulas for finding skipped debtors. This process is referred to as “skip tracing” and it employs many of the same methodologies as private investigators and other professionals use to locate any missing person.

One of the most important skip tracing actions involves contacting and putting an acceptable amount of pressure on the debtor’s contacts. Speaking with all listed employers, all institutions and organizations the debtor is associated with, and contacting any references the debtor listed on their loan application often bears fruit. Even if these connections fail to offer assistance they will often offer up the name and contact information of other leads who may provide access to the missing debtor. The key to receiving useful information from a debtor’s connections and their leads lies in communicating with them in the right manner. E-mail and phone calls are easy to dismiss and to ignore, but in person meetings and attempts at making contact are more likely to result in open and honest communication.

The skip tracing formula will vary from debtor to debtor, but ultimately there are a few key principles which never vary.

The Amazing New Secret of the Debt Buying Industry

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Like all high-stakes industries, the debt buying industry is constantly evolving. Debt buying and collections agencies consistently update their strategies and tactics to further increase the chances of receiving money from debtors. For example, modern debt buyers have learned how to use social networking websites like Facebook and Twitter to remain in contact with debtors, to learn about a debtor’s lifestyle, and to develop relationships with debtors which lead to payment.

Not only are debt buyers using social media websites to perform their work better, they are also using these websites to determine whether a prospect is likely to pay off their debts in the first place.

One of the secrets to effective debt collection lies in being able to distinguish between debtors who are likely to pay off their debts, and debtors who are unlikely to honor their loan’s repayment terms and conditions. Determining whether a debtor is likely to pay back their account balance or not depends on a number of criteria every good collection agency will consider before taking on a case.

For example, an individual who has more than $75,000 in debt, an individual who is in jail, or an individual with no cash-flow and no prospect for building cash-flow is unlikely to pay back their debt, no matter what. On the other hand an individual who lives large, who clearly spends a lot of money on a daily basis, who has a relatively small level of debt, and who has plenty of personal assets and connections with other people who have personal assets, is a prime candidate for effective collections. Social networking and social media sites offer an exceptional way to evaluate these criteria.

Time-Barred Debts: Debts with Expired Statue of Limitations

There are plenty of debts out there which are known as "Time-Barred." To put it simply, a Time-Barred debt is a debt which is too old to be collected through a normal court process. That means the debt's owner doesn't have to worry about legal action being filed against them from their creditors or from collectors hired to acquire their debt. While it's not impossible to collect on a time-barred debt, it is highly unlikely you will be able to do so. After all, without the threat of legal action there's a slim chance of a debtor complying with a collector's wishes. 

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What constitutes a Time-Barred debt, and the length of time needed to pass before a debt's statute of limitations expires, varies from state to state. For some states a debt might become Time-Barred within 3 years of it being owed. For other states the statute of limitations on a debt might not run out for at least a decade. To find out whether a debt is Time-Barred or not you need to learn the law of your state. You can also call the office of your state's Attorney General to find out when a debt becomes, essentially, uncollectable.

These laws not only protect a debtor from legal action, they also protect debtors from overly aggressive collectors looking to acquire payments off of the expired debt. If a debtor has been harassed or aggressively pursued by a debt collector over a Time-Barred debt then that debtor is legally able to sue the collector or the creditor itself. If you are a creditor then you likely don't want to be taken to court over a debt you can't collect on, and you likewise don't want to expose your creditor clients to legal processes due to your behavior. So while Time-Barred debts can technically be paid back, they often aren't worth pursuing.

Little Known Secrets for Collecting Judgments

Most debt collectors don't want to have to bring their debtors to court for the same reason why most debtors don't want to go to court. Going to court to settle a debt is an uncertain affair, it can be very expensive if you have to hire lawyers, and it is almost always a big interruption of your daily working life and routines. Yet there are a few little known secrets for collecting judgments which the most successful debt collectors understand, and which help them make court a worthwhile experience every time.

The first little known secret for collecting judgments is the fact you need to run the math and figure out whether a debt is worth bringing to court in the first place. Take out a piece of paper and draw two columns on it. In the first column write out how much money you have to gain from collecting on the debt which you're considering bringing your debtor to court over. In the next column write out and add up all of the expenses you can expect to incur from going to court. See if the numbers work out in your favor, and then decide whether to go to court or not.

Interestingly enough, the best secret for collecting judgments in court is a very simple, common sense one- you need to make sure you abide by the law throughout the entire process. The number one reason why you'll lose a court case against an individual who owes you a debt is if you break the law at any point in the process of attempting to collect from them. If your debtor can prove that you have harassed them, or if you otherwise violated one of their rights as a debtor, then you will lose your case. Most debt cases are yours to lose, so focus on making sure you abide by the law and your industry's best practices and you should do just fine collecting judgments.

3 Sure Fire Ways to Collect International Debt

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Over the last 3 years, more people than ever before have started to default on their debts or otherwise attempted to skip out on their financial obligations. While plenty of individuals have begun to default on their domestic debt, even more people have defaulted on their international debt. International debt is more difficult to collect due to the fact every nation has their own laws regarding its collection, and a collection agent needs to abide by these laws. That's to say nothing about the added difficulty of tracking down an international debtor.

Despite these difficulties, there are 3 sure-fire ways you can collect international debt.

1. Know the Laws Involved: Not every country have the same legal agreements between each other regarding how you can collect on international debt. For example the United States has a different set of debt collection agreements with many Asian countries than they do with European countries. If you aren't well versed in these laws, or if you don't feel like you'll be able to understand them on your own, then consider working with a lawyer well versed in the relevant laws.

2. Sue the debtor: Filing official legal actions is your best bet when it comes to grabbing an international debtor's attention. International debtors are unlikely to respond to the same light, unofficial pressures as domestic debtors so taking serious, official, and occasionally drastic measures is often necessary. Keep in mind that the actual legal process and proceedings will occur within the court of the country of your debtor.

3. Pawn the debt off: You can also sell the right to collect the debts you're currently chasing to a company better versed in international collections. This is the fastest and easiest method of receiving compensation for the international debts you're presently responsible for.

Settling an international debt isn't impossible, but it is more difficult than collecting domestic debt.

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