What if my debtor is now unemployed?

Last week’s article on “How Can I Collect My Bad Debts?” elicited so much reactions and inquiries from my readers. I received so much text inquiries and emailed questions pertaining to their own bad debtors and own bad accounts. Some are asking if they can be imprisoned while many are asking how to deal with their collection problem. Honestly, I find some of the queries quite interesting, while some are really extraordinary. I guess, it doesn’t matter whether you are the creditor or debtor; problems pertaining to money are really very common especially nowadays.

Today, I will try to answer one of the questions emailed  to me: “Mr. Limtingco, Hello Sir, I read your column today about bad debt collection thru a third party. My questions are as follows: First, Is there a standard rate on these parties? or will it depend on how big or how small the debt to be collected be? Second, how to collect an old debt wherein the person who owed me had been laid off from work? It is almost a year now and the common reason during collection I heard was "no money"...Can the third party help on situation like this? I would appreciate to hear from you so I may be guided on how to collect all those debts that if I put it in a bank it might earn some interests...but now, it's all gone.”

To answer your first question, most collection agencies have their own commission fee matrix or commission rate. It ranges from 15 to 25 percent. The commission percentage is based on the aged of the account. In our parlance, “the older the account, the harder to collect.” So the older the account, the higher is our commission fee. The amount is also a factor but it has nothing to do with the commission fee. The amount will be a deciding factor whether the account will be accepted or not by the collection agency. My tip to you is look for those collection agencies that offer “No Collection, No Commission” scheme, as these are the more stronger and credible.

Now for your second question, being unemployed is really one of the hardest and saddest points in a debtor’s life. Losing a job can strike rapidly and hard especially that nowadays, there are even well established companies that are closing shops. In this case, you are the creditor should handle the borrower experiencing such hardships in the following manner: First, sympathize with his plight and let him know you are willing to negotiate but make sure that you are putting premium on taking responsibility. Second, find out why and for how long he will be out of work, what are his prospects for future employment? In this way, you would know what action/s you would take in the future. Third, ask him personally, his peers or family, if he can raise the amount of the payment by liquidating certain assets such as jewelry, personal properties, life insurance, or savings account? Does he have any support, back pay, or remittance coming? Fourth, ask him to work out a solution with you as you are also in need of the money, ask him “if the situation is reversed” what will he feel? Don’t end the conversation without a definite arrangement for action on the part of your debtor. And lastly, find out if your debtor is married? If so, contact him/her for payment. You can also go to CIBI Information ([email protected]) if you wish this account to be endorsed for collection.

For more credit & collection (C&C) questions, comments and rejoinders you want to share, you can reach me at 0917-7220521 or at [email protected]