Knowing How Far to Push Your Debtors

My initiation into the world of collections began back in the early 1980’s when our economy was still fairly strong. In those days, the prevailing mode of thought when an account became delinquent, was that you came on like a bulldozer with your debtors and did not stop until all monies were collected in full. Unrelenting aggression was the order of the day. And it worked!

The more intimidating and unbending I was, the quicker I collected. If the debtor began a sob story about his financial woes, I would rapidly interrupt him and let him know about how disinterested I was in his story. The only thing that interested me was when I was going to get the money.

As effective as this method was in those days, it is as ineffective today. In today’s economy, taking a hard line, unbending approach is a big mistake. We in the collection field must substitute brawn for brains at this point.

What exactly does this mean? Well, most debtors today are not paying their creditors because they are unable rather than unwilling to pay. Their business has taken a hit and the cash flow is just not there to make the payment. This is why creditors must now employ creativity and finesse to come up with a way to get paid.

The first thing to do is to find out everything you possibly can about your debtor. This includes the present financial condition of him personally as well as his business. It is important to focus on all future sources of income he is expecting to receive.

Is he a contractor who is scheduled to begin a big project in February? Is his father ill and he is expecting to receive an inheritance income when his father passes on? Is he in the process of selling a piece of property that will generate money? Has one of his customers that owes him a great deal of money promised to pay him on a certain date. The list is endless.

However the “finesse” aspect of the plan comes into play in uncovering this information from your debtor. It is a game that requires attention and practice to get skilled at.

The first thing to remember, is that you are on a fact finding mission every time you speak with your debtor. You want to engage your debtor in conversation and really listen to what he is telling you.

Never be afraid to ask directed questions. Your debtor will probably be eager to offer his financial information to you if he believes that you are listening to him and that you will take the information into consideration in structuring a settlement that is feasible for him to live up to.

This approach is something that is very difficult for many creditors to get used to, especially if they were schooled in the aggressive bulldozer method of collections. In that school of thought, telephone conversations with the debtor were done to intimidate and not to “listen” to the debtor’s tail of woe.

As many of my readers know, you would be hard pressed to find anyone in the collection field more aggressive than myself. I never used to cut debtors any slack and I was an extremely effective collection attorney.

However, as the economy took a turn for the worse, my effectiveness began to change. When I would push debtors up against a wall and use my most aggressive tactics, I would still not get paid. I knew that I had to rethink my style of collection if I was to remain an effective collector.

I began experimenting with new methods and found that my collections and settlements were improving. What I came to understand, was that I was dealing with a new breed of debtor that required a different method of collection to maximize recovery.

This new type of debtor has not experienced a life time of defaulting on his financial obligations. In fact, many are in financial trouble for the first time in their lives.

They are intelligent business people whose businesses have gone bad. This has resulted in them not being able to meet their own financial obligations.