How long does debt collection take? Companies are increasingly struggling with the problem of dishonest contractors. They may either fail to meet the terms of the contract or fail to pay the invoices issued to them. Most entrepreneurs are concerned with the second issue. We can remedy it thanks to effective debt collection. Can we somehow speed up debt recovery? we answer.
The first stage of debt collection is called amicable debt collection. What exactly is it about? As the name suggests, on debt recovery in the gentlest possible way. In practice, debt collection companies most often send reminders for payment to contractors. The letter often states that if payment is not received, the case will be taken to court. We can also carry out debt collection on our own. We can remind the contractor by phone about the need to make a payment. We can also go directly to his company’s headquarters or inform him by e-mail that we have not yet received payment.
The effectiveness of this type of action varies, but the duration of debt collection activities depends to a large extent on it. The role of debt collection is to recover the debt. Therefore, it lasts as long as the contractor does not make a payment to our account. Of course, we can bring the case to court earlier. The time for amicable debt collection is set by each company on its own. Loan companies usually spend about 60 days on it. Banks focus on slightly shorter periods. After a maximum of one month’s delay, the case goes to court.
Meanwhile, ordinary commercial and service companies set various deadlines for their contractors. Some are able to wait for payment for a maximum of 7-10 days. Others, on the other hand, do not consider the possibility of bringing a case to court at all. Then, debt collection activities may continue until the counterparty pays or the debt expires. Using the help of a professional debt collection agency, we usually have a predetermined duration of amicable debt recovery. It often lasts no longer than 2 months. After this time, the debt collection company reports the case to the court.
Most of us think that court procedures should be limited by legal time frames. Nothing could be more wrong. In some cases, the court does have certain time limits. However, this does not apply to debt collection, or rather claims for payment. Judicial debt collection begins with the filing of a lawsuit by the creditor. It can take several months from the time the lawsuit is filed to the first hearing.
On average, the waiting time for a hearing is about 2 months. Then much depends on the attitude of the debtor himself. If he does not put up any resistance, then the whole procedure can end very quickly. However, if the debtor is very active and undermines our arguments, the time for issuing a positive judgment for us is extended. Some are suing dishonest contractors for even several years. Nevertheless, these are sporadic cases. Within two weeks of the judgment being issued by the court, the case should be referred to the bailiff. This one will have to recover money from the debtor’s property for us.
How long will we wait for them? There is no one specific answer here. It all depends on several things. First of all, we must take into account the debtor’s financial status. It is much easier to get money from a thriving company than one that is on the verge of bankruptcy. Additionally, just cashing in your assets may take some time. If the debtor has free cash, the bailiff can simply pay us the money. Sometimes, however, he has to sell a fixed asset, for example, which takes some time. Finally, the pace of debt collection will depend on the attitude of the bailiff himself. Some work efficiently, while others are a bit sluggish.
Long or short?
Amicable debt collection may last as long as our claim is not time-barred. The duration of court debt collection may range from several months to even several years. The question remains, is it long or short? Most entrepreneurs would certainly like to get their money back quickly. Nevertheless, let us remember that debt collection is often the only way to recover them at all. Some companies do not take collection actions because they believe that they are taking too long. Meanwhile, without them, it may turn out that we will lose the value of the debt that has not been paid. Remember to set specific dates for amicable debt collection.
Let’s give ourselves a month to get our money back, for example. If the debtor does not pay, let’s file a lawsuit. However, the actions we take must be consistent. If we threaten the debtor, it is not to back down from our threats to take the case to court. Let us also adopt a uniform debt collection policy towards all our contractors. Thanks to this, we will certainly be able to recover most of the money that is simply due to us for the service performed or the goods sold.