Debt collection is the process where the creditor requests the debtor to pay due or overdue amounts and other assets under the contract/agreement between the creditor and the debtor; or under the decision of a competent State agency in a Court lawsuit where the final judgment or decision is available.There are many different forms of debt collection with their own advantages and disadvantages.Currently, there are two common legal debt collection method, including: debt collection by legal medthod and debt collection by negotiation.
1. Legal debt collection by legal measuares
Legal debt collection: is a form of debt collection by complying with the provisions of law. Using the terms of the contract or other agreement signed between the parties to force the debtor to perform the payment obligation
Legal debt collection includes: initiating lawsuits or denouncing through court proceedings or coordinating with authorities to force the debtor to perform the debt repayment obligation.
This is a solution that is effectively applied, ensuring compliance with the law, helping to recover bad debts, and resolving complex debts.
The in-chage persons are usually Lawyers or Professionals with sufficient legal knowledge.
They apply their legal knowledge and experience to perform debt collection tasks such as: verifying assets; reviewing the document’s legality; etc. as well as are able to encourage competent agencies and organizations to coordinate in debt collection.
This method will be applied when we fail to collect the debt via negotiation or persuasion, or when the debtor intentionally avoids making the payment or has a payment plan but the payment is slow and prolonged.
For cases where the debtor intentionally disperses assets, this is the optimal and most effective method.
Legal debt collection is also used to put pressure on the debtor by requiring the authorities to apply measures to limit some of the debtor’s civil rights, affecting the psychology for the prompt debt collection (For example, banning the debtor from exit of the country, etc.). Therefore, legal debt collection is a solution that should be prioritized to ensure the efficiency and safety for companies.
2.Legal debt collection by negotiation
This is a form of debt collection by influencing the debtor emotionally and psychologically, while still ensuring a good relationship with customers.
Debt collection via negotiation includes the following stages:
First, prepare to negotiate
This stage includes: case study, documents review, debtor inquiry, goal setting, and negotiation processes.
Second, contact the debtor
Including: calling, email, making appointment to work directly with the debtor.
In most cases, the process of direct contact with the debtor takes quite a long time. Therefore, each negotiation process with the debtor plays an important part, and the in-charge person needs to master negotiation skills and understand what needs to be done in each process. In particular:
Negotiating through emotional and psychological impact:
- Meeting location: We should let the debtor choose the location first. Because, in the early stage of the negotiation, it is necessary to keep information confidential for the debtor as well as to save the debtor’s face and reputation. This is a delicate matter, which the debtor may not want his relatives, colleagues, friends, etc. to know;
- The debt collector’s attitude should be open, gentle, and strike at the debtor’s feelings and self-esteem. He/she absolutely should not mention the law nor threaten the debtor;
Negotiating by influencing third parties:
- The indirect impact on the debtor’s face and reputation is a fairly effective method through a third party.
- The third party means any reputable people with the debtor, or influential people doing business with the debtor (For example, a business partner, colleague, or family member).
Negotiating through pressure:
This measure is usually applied in cases where the debtor refuses to cooperate and intentionally does not make the payment by putting pressure on the creditor’s reputation through the form of media, social networks, etc.
Above are our opinions of legal forms of debt collection, hope this article is useful to readers.