Proactive Steps Creditors Can Follow to Address Debtor Delinquency

 Posted on September 20, 2022 in Debt Collection

No creditor wants to deal with debtor delinquency, but it is an unfortunate reality of doing business. For banks, credit card companies, and other creditors who are facing debtor delinquency, there are steps that can be taken to mitigate the situation. By taking action at the first sign of debtor delinquency, including when payments are made late, creditors can work with debtors to find solutions that will ensure that debts can be repaid, and they can take steps to protect their interests and minimize potential losses.

Responding to Signs of Delinquency

When a creditor sees indicators that a debtor may be struggling to make payments, they can take multiple steps to address the issue, avoid future delinquency, and ensure that they can recover what is owed. These steps include:

• Communicate with the debtor. It is important for a creditor to open the lines of communication with the debtor as soon as possible. In some cases, delinquency may have been the result of an honest mistake or misunderstanding, and a simple conversation can help resolve the issue. By communicating with the debtor, a creditor can discuss the delinquent debt and come up with a plan to repay it. Additionally, regular communication will help build trust between the creditor and the debtor, which is important in maintaining a good working relationship.
• Explore repayment options. There are a number of different options for repayment that creditors can explore with debtors. These options include installment payments, lump sum payments, or even negotiating a lower balance owed. It is important to evaluate each option carefully and choose one that will protect the rights of the creditor while ensuring that the debtor can make affordable ongoing payments.
• Send a demand letter. If attempts to establish communication are unsuccessful, the next step is to send a formal notice that states the amount owed, the grace period for payment, and any late fees or penalties that may apply. A demand letter will also give the debtor a deadline for payment, and it will detail what will happen if they do not comply. After sending the demand letter, the creditor should give the debtor a reasonable amount of time to respond before taking further action.
• Utilize debt collection agencies or attorneys. If a debtor fails to respond to communications or is unwilling to work with a creditor to find solutions, the creditor may need to take steps to collect the debt. In these situations, it is a good idea for a creditor to consider using the services of a debt collection agency or attorney. These professionals have experience collecting delinquent debts, and they may be able to get results in situations where a creditor has been unsuccessful.
• Consider charging off the debt. In some cases, it may be more beneficial for a creditor to charge off the debt as opposed to continuing to try to collect on it. This is typically only done as a last resort after all other options have been exhausted. When a debt is charged off, it will be written off as bad debt when filing taxes, and this can provide some financial relief for a creditor.

Contact a Chicago Debt Collection Lawyer

No creditor wants to deal with debtor delinquency, but it is an unfortunate reality of doing business, and it is important to take proactive steps to address the issue if it does occur. At Dimand Walinski Law Offices, P.C., our Cook County creditors' rights attorneys provide representation for creditors who are seeking to address delinquency and collect debts. We can ensure that creditors take the correct steps to resolve issues proactively while protecting their financial interests. To set up a consultation, call us today at 312-704-0771.

Sources:

https://bankingjournal.aba.com/2021/04/staying-one-step-ahead-of-credit-risk/#_ga=2.228316829.1037669538.1620411495-2098255569.1620148093

https://bizibl.com/finance/download/6-actionable-steps-improve-retail-bank-collections-recovery