Debt Recovery Key Terms

Boost your collection practices by understanding and employing a debt recovery program

Having bad or old debt on the books of your business hurts the bottom line. Debt recovery programs provide an answer to collecting those debts. These programs use a combination of collection letters and phone calls to encourage debtors to pay up.

Whether you plan to start an in house debt recovery program or outsource your bad debts, knowing the key terms you will run across during the recovery process is vital to the program being as effective as possible.

 

Accounts receivable

In a general sense, accounts receivable refers to the amount of money owed by each customer. In most cases, unpaid amounts that have been invoiced are eligible for debt recovery as long as the due date of the invoice has passed.
Try: Business Owner's Tool Kit offers an in-depth look into accounts receivable.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act provides protection to consumers against harassing debt collections. When initiating a debt recovery program, it is vital for you to ensure that these guidelines are followed.
Try: The Federal Trade Commission offers information on the ins and outs of the Fair Debt Collection Practices Act.

Bankruptcy

Bankruptcy is a judgment by a court that relieves the petitioner of some of his debts. In some cases, it removes the debt completely and in others, the petitioner is required to pay the court each month for the court to apply toward the debts. If someone with a bad debt files for bankruptcy, the amount they owe your company may be included in that judgment. If that is the case, you must stop all collection activities, which includes any debt recovery programs.
Try: The US Navy Judge Advocate General website offers information about bankruptcy, including how a bankruptcy judgment affects a consumer and a creditor.

Collection agency

A collection agency is any third party company that is hired by a creditor to try to collect payment on past due accounts. Collection agencies are subject to a statute of limitations, as well as the Fair Debt Collection Practices Act.
Try: Card Report offers detailed information about collection agencies, including the methods used and limitations placed on them.

Statute of limitations

If you have bad debts owed to you, there is only a certain amount of time that you can sue for those debts. This is called the statute of limitations. The time can range from 5 to 10 years, depending on the type of debt.
Try: You can find information at Fair Debt Collection.com about the statute of limitation laws in each state.

Uniform Commercial Code (UCC)

The Uniform Commercial Code (UCC) is a set of guidelines that have been enacted into state law in every state except Louisiana. These codes govern every aspect of customer relations--from the actual sale to providing letters of credit or sending out dunning letters.
Try: WiseGeek offers a detailed look into the Uniform Commercial Code and how it affects consumers, businesses and debt recovery practices.

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