The term bad debt refers to an amount owed to a creditor that is unlikely to be paid. If the creditor is not willing to take action to collect because of various reasons, for example due to a company going into liquidation or insolvency.
Bad debt collection
The collection of bad debt refers to the whole recovery process of default payments and past-due debts, marked by the creditor as uncollectible. It is described as an attempt to secure a full payment from the debtor on behalf of the original creditor. Debt recovery can be carried out either by a debt collection agency or by a financial subdivision within creditor’s organisation. Debt collection is considered as an income and potential profit for the creditor. The same applies, when the lender sells their debts. Here the original creditor can chose to sell the default profiles to different debt buyers and receives a fraction of the debt owing. Default collection process consists of various and sophisticated strategies developed specially for collecting overdue payments, which ensure legal and ethical debt recovery.
Methods of recovery
The most common method to recovery debts is through a debt collection agency who will find the debtor and communicate with them using various communications to secure payments.
If unsuccessful a debt collection agency may recommend legal proceedings. Depending on the debt collection agency this may include hiring solicitors and attorneys. However, within Australia debts small claims (i.e. AU$25,000 in Queensland) may be referred to the relevant small claims tribunal. In these instances a debt collection agency can prepare legal documents to file a claim.
Call us today on 1300 887 296 for more information about our debt recovery processes or how to manage bad debt.