You need to take action when a debtor doesn't pay.You can hire a collection agency or send a demand letter to the debtor.Look at each option carefully.You can get a referral from your nearest bar association to find a lawyer.
Step 1: How much does the debtor owe?
The debtor might owe interest, fees, and penalties.You can assess late charges by looking at your promissory note.Add up the total amount the debtor owes.
Step 2: It's a good idea to avoid harassing calls.
Debt collectors are not allowed to engage in aggressive collection practices.If you don't make any phone calls, you can avoid the problem.Write to the debtor in writing.Collection practices that are illegal include threatening to arrest people and calling at inconvenient times.
Step 3: Send notices.
As soon as the debtor is late, send the first letter.Tell them how much they need to pay in order to be current on the loan.Information about the date of the promissory note is included.If you want, you can send past due letters.If the debtor doesn't pay you back in time, you will pursue other remedies spelled out in the promissory note.Send the notification certified mail, return receipt requested and keep the receipt with your copy of the letter.
Step 4: Write a letter of demand.
Your late-payment notices might be ignored by the debtor.You need to send a demand letter.To see what actions you can take, review your promissory note.The debtor must pay the entire amount owed if your promissory note allows you to accelerate payment.If you have a demand letter, format it like a business letter.A description of the dispute is needed.The date of the promissory note, the payment due, and the date you sent notifications should be mentioned.The judge will find this helpful if you go to court.What do you want the debtor to do?If you want the debt to be paid off, include a deadline.If the debtor doesn't meet your demands, you will take them to court.
Step 5: Talk with the debtor about repayment options.
The debtor might call panicked after receiving your demand letter.Discuss when the debtor might catch up.If you allow them to skip a few payments, they will be current on their loan.You might want to play hardball and not allow them to miss a payment.
Step 6: If you can, seize it.
Property may have been pledged by the debtor to back up the loan.You can seize the asset in that situation.You should have a signed security agreement that shows where the collateral is located.You can't break the peace when you seize collateral.You can't trick the debtor by pretending to be a police officer.If you can't reach the collateral, you should go to court.
Step 7: If you want to settle for less than the full amount, you should.
You'll probably be wiped out if the debtor declares bankruptcy.The debt should be settled for less than the full amount.You may have to negotiate.Try to get the debtor to pay at least 50% of what they owe.A lump sum payment should be made in cash.How stable is the debtor?Do they have a job?Do they have other debt payments?
Step 8: Find the correct court to file a lawsuit in.
The debtor cannot be sued in just any court.Depending on the situation, you have options.If you're suing for a small amount, consider small claims court.Each state has a small claims court that hears cases up to a certain dollar amount.If you don't have an attorney, small claims court is ideal.The debtor lives or works in the county or district where you made the contract.You can file in federal court if you live in a different state than the debtor.You're better off if you have a lawyer.
Step 9: If you want to file a complaint, do so.
You can start a lawsuit by filing a complaint.You can identify the parties to the lawsuit in this document.Attach a copy of your promissory note.Paying a filing fee will allow you to file your complaint.You can fill in the blank forms in most small claims courts.If you can't find a form, look online for sample complaints or consult with an attorney.
Step 10: The debtor should send a notice.
You can get a summons from the court clerk if you send a copy of the complaint.You will need to follow the rules in your state.Have someone hand deliver the papers to the debtor.You can ask a friend or hire a process server to deliver them.You will serve the debtor's registered agent if they are a business.In some counties, you can pay the sheriff to make service.First-class mail is used to send the papers to the debtor.
Step 11: Receive the answer from the debtor.
The debtor can respond by filing an answer and sending you a copy.It will contain the debtor's defenses.The debtor might argue that the promissory note isn't valid or that you've agreed to let them stop making payments.You could also be sued by the debtor.You can be sued for illegal debt collection practices if you call the debtor in the evening or threaten them physically.
Step 12: Prepare yourself for the trial.
Whether the promissory note is valid will be the focus of the trial.Unless you're in small claims court, you will need to do a lot of work before your trial date.You may need to have a settlement conference to swap documents.Courts want parties to settle their disputes so a trial isn't necessary.There is a way to file a motion for summary judgment.You want to win without going to trial because there is no set of facts that will allow the debtor to prevail.
Step 13: You should go to the court.
Both sides can call witnesses and introduce documents.You should testify about the debtor's history of payment and introduce the promissory note.A judge will decide who wins in most small claims courts.
Step 14: Comply with your judgement.
You get a piece of paper if you win.You need to enforce it.If you need to take other action, the debtor can pay you.You can take the debtor's wages or bank accounts.You may be able to have the sheriff seize and sell your personal property.Some of the proceeds from the sale will be given to you.You can make a claim on the debtor's home.You may be able to force a sale of the property in your area.If the debtor sells the house or refinances, you can receive payment.
Step 15: Look for a collection agency.
A member of the Commercial Collection Agency Association can be hired.State and federal collection laws are followed by these agencies.Check to see if anyone has complained to the Better Business Bureau about the collection agency.
Step 16: They're licensed, make sure.
Collection agencies should be licensed in the state where they are collecting the debt.Double check the license number by calling the state's licensing agency.Debt Collectors are usually required by states to be bonded and have insurance.
Step 17: Check fees.
Contingency fees are usually charged by collection agencies.They only get a fee if they collect money and take a percent off the top.15-20% of the amount collected is typically taken by an agency.The fee agreement should be written.An agency with a 20% contingency fee keeps $2,000 of every $10,000 collected.Some debts might be too small for agencies to take on.Call and check.
Step 18: Ask how they find people who owe money.
After stopping payment on your debt, the debtor might have skipped town.The collection agency should tell you how to find them.They could use skip tracing, which involves using special databases to find the debtor.
Step 19: The person should sign a contract.
It's important to get the agreement in writing.All key terms should be included in the contract.The terms of your contract control can be used if you have a dispute with the collection agency.
Step 20: Inform the agency about your information.
Sharing helpful information, such as the debtor's name and address, will speed up the collection efforts.The debtor has a phone number and email address.The debtor may have responded to your efforts to collect the debt.There is a copy of the promissory note.