Debt recovery can be a sticky business, which is why it’s always best to engage the services of a debt recovery lawyer from the very beginning, rather than starting off with a debt collector
It’s important to note that generic debt collectors and mercantile agents are not the same as legal counsel. A key differentiator is that when you work with a debt recovery lawyer, you are supported end-to-end, whereas mercantile agents are only able to support you until you decide to make a claim through the courts.
There are a number of ways that engaging a debt recovery lawyer early is more efficient than starting out with a collector (or on your own!). Here are 5 reasons why your collection process should always begin with finding a lawyer that specialises in recovering debts.
Lawyers Focus on Facts
Lawyers, unlike mercantile agents, do not make commissions on recovered amounts. This means they’re better equipped to build a solid strategy by focusing on facts, and helping you stay on track when making payment demands and claims. Furthermore, lawyers understand the scope and parameters of the commercial litigation process, so they’re able to provide proactive high-quality advice on next steps and best practices.
Additionally, debt collection lawyers will not pursue a matter that is not founded on reasonable evidence. If this is the case, your lawyer will be able to give you guidance on how to protect yourself and your business going forward, so that you don’t find yourself in the same predicament in the future.
Don’t believe the stigma surrounding lawyers charging hefty fees. In reality, engaging the services of a debt recovery lawyer is more cost-effective than hiring a mercantile agent.
In order to illustrate this point, let’s use an example:
Let’s say that you’ve made your best efforts to contact your debtor, you’ve sent reminders and made phone calls, and now you’re at the Letter of Demand stage. The amount the debtor owes you is $100,000 and you’re looking for assistance.
The standard commission charged by a reputable mercantile agent is 30% – 40% of the amount owed, in this case, that would be $30,000 at minimum. Alternatively, engaging the services of Woods & Day Solicitors would only cost you $125 excluding GST – a fraction of the price!
An additional benefit of engaging a debt recovery lawyer early is that a Letter of Demand sent by a law firm carries more gravitas than one from an individual or agent. This means that it’s more likely that you’ll recover your debt at this stage, without needing to go to court, and having only spent $99!
In the less likely scenario that the debtor still refuses to pay, then of course, there are further legal fees. That being said, the total cost would still not probably amount to 30% of the amount owed. If you are successful in the debt recovery from court proceedings the debtor will be required in most circumstances to reimburse the majority of your legal expenses.
Lawyers always maintain a firm and professional manner in their dealings with clients and third parties. On the other hand, mercantile agents and debt collectors have a reputation for being forceful and combative. Irrespective of whether this hostility helps or hinders you receiving what you are owed, it will have a negative impact on your personal and business brand.
With stringent professional standards to adhere to and a strong background knowledge of the debt recovery process, lawyers will make powerful arguments that will see your case won and your reputation still intact. Lawyers have a reputation of their own to uphold, so are equally invested in your brand and overall success.
Continuity is key with your debt recovery process – it’s best to ‘pick and stick’ when it comes to choosing a service provider to support you. Mercantile agents can only support you up to the Letter of Demand stage, after which, you’ll require legal representation. A debt recovery lawyer is a one-stop-shop, offering a complete, end-to-end solution and simplifying the process.
In an ideal world, debt collection disputes would be resolved without going to court – unfortunately, this isn’t always the case. If the matter goes beyond the Letter of Demand stage and you have already engaged a mercantile agent, you’ll be required to pay the agent’s fees and engage a lawyer separately to take over your case (also incurring fees). By not engaging multiple service providers you lower your overall expenses!
If you are seen to be working with a lawyer from the outset of your debt collection process, this adds extra weight to your demand for payment, without being forceful. Lawyers have a reputation that precedes them, making people more likely to pay if a Letter of Demand is sent from a law firm. It also lets your debtor know that you’re serious about claiming payment owed.
When a debt recovery lawyer writes your Letter of Demand, it is unlikely that a debtor will find a legal loophole that will allow them to avoid paying. A Letter of Demand from a solicitor will make it clear to the recipient that refusal to pay may result in further commercial litigation, and judgement against them would make them liable for your legal expenses, as well as their own.
All this combined, is more likely to encourage action from the debtor.
Engaging a debt recovery lawyer early is your best bet when it comes to a successful claim. By focusing on the facts and using their specialised knowledge, lawyers will be able to give your case the professional continuity required to recover your funds. All this, and it’s the most efficient and cost-effective way to collect the debt you’re owed!