Sometimes the person you lend money to does not want to pay the debt. If the person breaks their promise, you shouldn't feel guilty about asking for your money back. No matter what the reason for giving a debt, when the debtor refuses to pay, there is always a way to collect it. Sometimes, the debtor just needs to be reminded, but you still need to be prepared to take further steps to get your money back as soon as possible.
Step
Part 1 of 3: Collecting Money
Step 1. Determine when it is appropriate to decide that the debt needs to be collected
If at first you don't make a payment deadline agreement, you will need to collect the debt yourself. Determine whether the debtor is willing to pay off the debt without being billed.
- Consider the amount owed. Small debts may not need to be collected immediately, while large debts may take longer to be paid off.
- If you are owed money through a business transaction, you should collect the debt as soon as possible. Waiting for debt payments will only make it more difficult to collect.
Step 2. Collect debt properly
After the payment deadline has passed, ask for your money. At this stage, you just need to make sure that the debtor is aware that his debts have not been paid. Sometimes, debtors just forget that they need to be reminded. Formally, this is usually referred to as a "billing note."
- Don't ask for payment, but give a warning (“Do you remember the money I lent you?”) so that the debtor doesn't feel embarrassed.
- Include all relevant information when collecting debts. You must be prepared to provide the amount of money given, the last time you received the payment, the loan amount, how the payment can be made, contact information, and a clear deadline for paying debts.
- If you're dealing with a company or client, it's a good idea to keep billing records in the form of letters. This will provide you with written evidence in case the situation worsens.
- Payment deadlines are usually 10 to 20 days from the time the debtor receives the invoice. The time span is not too long, but also not so sudden that the debtor will not panic.
Step 3. Decide if you want to accept another form of payment
Waiting for debt repayment may take too long. If the amount is small or you're not sure the debtor can afford it, try to find other payment alternatives. Paying off debts with services or other things can be done if you want. In this case, you need to be clear about your wishes and make a deal as quickly as possible.
Do not bid too quickly because this can give the impression that the value of the debt can be lowered or the debtor may delay payment
Step 4. Be firm in collecting payments
You can usually send a "collection letter". If the debtor doesn't respond to your request, charge more firmly. Show that you are serious about collecting payments or paying off debt commitments. Include clear instructions for making those payments.
- Use more assertive language and show seriousness. Words like “You have to pay now,” or “We have to make a settlement agreement right now” will let the debtor understand that you are serious and don't want to enter into another negotiation.
- Include clear consequences for not paying. Let the debtor know what steps you will take if the debt is not repaid immediately. Make sure you're actually going to do that.
Step 5. Increase the intensity of your debt collection
If you do not receive payment from the request for debt settlement, it could be that the debtor does not have money or does not want to pay. Your job is to make it a priority to pay off debts by phone, mail, email, or in person. Make sure he's willing to pay your debts before paying to someone else (or running away).
Step 6. Use the services of a debt collection agency
Hiring a third party to collect debt will show the seriousness of the debtor, and free you from the hassle of debt collection and payment arrangements. Debt collection agencies may request a commission of up to 50% of the payment amount. Therefore, you have to accept that a smaller payment amount is better than no payment at all.
If paying for debt collection services is too expensive, you can skip this step and go straight to court
Step 7. Know what not to do
If you want to collect debt, there are several things that may be illegal in your area. In the United States, you may be in breach of federal law set out in the Fair Debt Collection Practices Act by improperly collecting debts. Most likely, you won't be in trouble with the law, but you should still comply with the regulations that apply where you live. While local laws may vary, there are some general tactics to avoid:
- Calling outside normal hours;
- Increase the amount of debt;
- Deliberately delaying debt collection in order to get more payments;
- Inform the debtor's employees about the company's debts;
- Lying about the amount of money lent;
- Pretending to threaten the debtor.
Part 2 of 3: Taking Legal Action
Step 1. File a lawsuit through a small claims court
Visit your local court's information center or website for opportunities to file a lawsuit. In the United States, the amount of debt that can be sued ranges from $2,500 to $25,000 depending on the laws of each state. In Indonesia, each province has its own district court website, while in the United States, you can find the nearest court site via the link provided on the State Court Information Center website [State Courts directory].
- If you take this case to court, be prepared to face trial. If you have contracts, invoices, or other documentation that can be used as evidence, make copies of all of these documents to give to the judge and the debtor or his attorney. Also copy all other evidence that can be used.
- Resolving debt problems through legal channels is a big step. Make sure the amount of debt collected is commensurate with the hassle of facing trial. If the debtor is a friend or family member, this is guaranteed to strain the relationship.
Step 2. File a lawsuit
If you fail to file a claim in small claims court, or are not allowed to file the lawsuit, go to the District Court. Hire the services of a lawyer, fill out the suit form correctly, and be prepared to face court while gathering as many written documents as possible.
- This option is generally more expensive because you have to pay court fees and attorneys, but if successful, it may be more profitable than using a debt collection service.
- The threat of prosecution may be enough to get someone to pay their debts, but you shouldn't make that threat unless you really intend to take the case to court.
Step 3. Fill in the petition to create a Summons
After obtaining the judge's decision, you can request for a summons to be made on the basis of contempt of court if the debtor has not paid his debt. Filing a Summons together with a Notice of Court will cause the court to convene a hearing to force the debtor to return to court and explain the reasons why the debt has not been paid.
At trial, you may seek permission from the court to deduct the debtor's salary
Part 3 of 3: Accepting Payments
Step 1. Take your money
After going through the process of questioning, collecting, and filing claims, the debtor will be forced to pay his debts. Sometimes, you just have to ask for it. However, it is possible that you may need further steps in court, such as requesting an Execution Order or Lien to obtain payment that is commensurate with the amount owed.
If the case has gone to court and you have already hired the services of an attorney, consult with him or her about the best course of action that can be taken
Step 2. Find the debtor's boss or boss
After getting permission from the court to deduct a debtor's salary, you need to find out who the boss or boss is. The easiest way is to ask the debtor directly. If he doesn't want to tell you, you can send an interrogator to force the debtor to answer questions under oath. Check your local court's website for information on interrogator use forms.
Step 3. Send the interrogator to meet with the debtor's boss
Once you know who the debtor's boss is, you need to send an interrogator to confirm that the debtor is still working and that his salary has not been deducted to some extent.
Step 4. Request a payroll deduction warrant
After receiving confirmation that the debtor is still actively employed, you can request a salary deduction warrant from the court. This letter will be sent to the debtor's employer to begin deducting his salary.
Each region may have different rules regarding salary deductions. Make sure you understand the laws that apply where you live
Tips
- Don't feel guilty about collecting money lent. The renegade is the debtor, not you. So you have the right to ask for it back.
- Keep thinking with a cool head and don't get carried away by emotions. It is the debtor who should be upset about not being able to keep his commitment to pay. A firm but polite attitude will increase your chances of getting paid.
- If someone or a company is having trouble paying debts, you should think twice before working with them in the future.
- Keep all written documents made during the billing period, especially if this matter continues to court. For business transactions, keep all the documentation you have.
- The collection of procedures in this article is intended as a source of basic information only. Keep in mind that the forms that need to be filled out, as well as the procedures used may vary where you live. Get as much information as you can before filing a lawsuit or hiring an attorney.
- If you own a small business or work as an independent contractor, you may need to take a different approach when dealing with clients who won't pay.
Warning
- To collect business debt, make sure you follow the applicable laws in your country. For example, in the United States, payment of business debt must be made under the Fair Debt Collection Practices Act (FDCPA) regulations (https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection -practices-act-text) and applicable state law or the collector may be subject to lawsuits.
- Be careful when divulging debt information to someone who has not paid as this can make you vulnerable to being subject to defamation articles.
- If the debtor has filed a bankruptcy protection request, you must stop collecting debt immediately because doing so could violate the law regarding debt collection.
