Methods of Repossession and Debt Collection:
Credit issuing institutions, organizations, and individual debt lenders devise various plans to avoid facing delinquent debt defaults that have to be written off ultimately. They try to get back their issued amount in two ways. These methods of debt recovery include repossession and debt collection. Repossession refers to the approach of taking a tangible asset of the defaulting debtor in possession once he fails to honour his loan obligations.
It may include the items against which the debt was initially issued like the car, house or TV, etc. All these clauses about asset possession in cases of a debt default are mentioned in the contract that is signed between the creditor and debtor at the time of loan issuance. Moreover, the contract may include the possession of any other tangible product as well. The specific taking-over of the asset funded via that debt amount is not an essential clause of the debt agreement.
Therefore, this method makes sure that in case of non-payment of dues, the debt issuers can recover their withheld amount by keeping a tangible product as a source of financial security and debt recovery. On the other hand, debt collection via professional debt collecting agents is the second method of debt recovery or debt collection. These agencies provide professional debt recovery services and make the maximum collections on behalf of the lending company or the individual creditor.
There occur instances in the debt recovery cycle that the collecting agencies show their inclination towards buying the debt from the original creditor. In this way, they own the debt amount and make all-out efforts to procure back the loaned amount in their name. They now become the creditor, and the debtor becomes financially and legally liable towards them regarding debt payment.
In both these approaches adopted by the debt collection agencies, their rights and responsibilities differ. They are obliged to follow a different code of conduct when they are just debt collectors, having no entitlement to the debt amount. On the contrary, they follow distinct guidelines when they become debt buyers. Thus, getting the originally issued debt amount in their name. This changes their role from a debt collector to a creditor, and they become eligible for getting back the indebted amounts. What can be recovered through the debt collection and repossession process, have a look here;
- Unpaid Salaries, when salaries are not paid by Employer.
- Unpaid Invoices, when buyer or purchaser does not pay the unpaid invoiced.
- Purchase Orders, when goods or services are delivered on POs and fee is not paid.
- When a partner does not pay the profit to other partner or parnters.
- When company is dissloved and the shared capital is not paid back.
- When cheque are not paid or bounced.