Unsecured Debt Collection

Dealing with unsecured debt collection can be difficult and complicated for both the debtor and the creditor. There are a wide variety of liabilities that would come under the umbrella of unsecured debts. For a debt to be considered secured, there must be some type of asset that is attached to the loan. In the event of a loan default, the asset that is connected to the loan can be repossessed and sold in order to recover at least part of the indebtedness. Automobile loans and home mortgages are two examples of secured debts. When dealing with debts that are not secured, there is no possibility of repossessed assets offsetting the remaining liability. Credit card payments, student loans, even utility bills are considered unsecured liabilities. When a debtor defaults on these debts, a collection agency is usually brought in. Collections agencies might deal in a variety of debts, or they might zero in on only one type of liability. Some agencies specialize in collecting financial debts. In this category are car loans, credit cards, lines of credit or other indebtedness that involve banks and financial institutions. Indebtedness that was caused by health care related expenses can often be collected by specialized agencies. These liabilities can include doctor bills, payments to dentists, or other medical expenses. Overdue payments on retail charge accounts for department stores and other businesses will frequently be pursued by specialized unsecured debt collection agencies. There are also organizations that recover funds related to bad checks.

In unsecured debt collection, creditors will have certain legal rights. While there may be sympathy for individuals who are unable to meet their monthly obligations, creditors are often honest businesses that can't afford to take a loss on unpaid debts on the part of delinquent clients, patients, or customers. When debts are secured by assets, the creditor has a realistic option to gain repayment. But when debts are not secured by any assets, the creditors can find themselves in a bad situation. That is why unsecured loans are considered greater risks than secured loans. A creditor will usually begin by sending notification of the expected payment to the defaulting debtor. This step can sometimes help to initiate an agreement that gives the debtor reasonable options for repayment. If this does not work, the services of a collections agency will often be called upon. There are specific laws against harassment during attempts to collect delinquent payments. Failure to obey these laws can result in an award of damages to the debtor. Most providers of unsecured debt collection will require payment for funds recovered. This payment could be as high as fifty percent of the amount collected. To avoid additional court costs, efforts to settle the situation out of court should be pursued before bringing suit.

While the creditor has certain rights when pursuing unsecured debt collection, debtors have rights as well. Fair practices when collecting on delinquent payments are not only a matter of courtesy, but a matter of legality as well. The Fair Debt Collection Practices Act outlines the methods that collections agencies can utilize. Fair treatment and non harassing methods are required in any collections activity. Collectors may only contact a debtor between the hours of 8 a.m. and 9 p.m. If an employer will not allow agencies to contact individuals at work, the collector must respect that preference. If a debtor writes a letter to the collector requesting that the contacts cease, the collector must stop calling. Contact can only be made if there is some action that will be taken that a debtor needs to know about, or if the collector wants to inform the debtor that contact has been halted. Harassment of any kind on the part of unsecured debt collection agencies is absolutely not permitted. Examples of harassment could include verbal abuse, any kind of threat of violence or bodily harm or harm to property, obscene language or profanities, lies and misrepresentations, as well as threats of legal action when legal action is not applicable to a debtor's situation.

Creditors do have the option of claiming delinquent payments as losses. Many creditors will do just that, turning over delinquent accounts to unsecured debt collection agencies. At this point, the debtor will have to face the practices of professional agencies rather than the original creditor. This can mean a stickier situation for the debtor. Coming to some kind of settlement may be more difficult in these cases. Generally, it is much better to try to come up with a solution to unpaid debts quickly with the original creditor rather than waiting until the situation spins out of control. Dealing with collection agencies and unpaid bills can be stressful to the point or robbing the debtor of a good night's sleep. The Bible talks about the comfort that is available to believers. "I will both lay me down in peace, and sleep: for thou, Lord, only makest me dwell in safety." (Psalm 4:8)

For some debtors, looking into credit counseling can be a good idea. This approach can eliminate the need to deal with unsecured debt collection agencies. There are a wide variety of credit counseling agencies and not all are reputable. Agencies that charge high fees at the point of sign up or continue to collect such fees on a monthly basis may not have the client's best interests at heart. Any organization that pushes a potential client to sign up for a program without carefully looking at that client's individual financial information should be avoided.