Difference between Debt Collection and Debt Recovery

Difference between Debt Collection and Debt Recovery

When it comes to debt collection and debt recovery, these two figures sound same but there is very little difference between these two. Debt collection includes all the ways taken into consideration to recover debts. It is a polite way to tell the debtor about the money he owes. Gradually, these notices take a formal tone and maybe warnings. This might include telephone calls, reminder statements, specific ‘collection’ letters that request payment, or a pre-court ‘Letter before Action.’ There are several debt collectors, individuals and companies, who help people to collect their debts.

This also depends on the firm, how many employees they have and how effectively they work. It can either be a proprietor or a billion dollar company. Generally, they hire a third party debt collection agency if the debtor goes against the terms and conditions signed at the beginning.

Debt recovery comes at a later stage to debt collection. It is the actual recovery of debts once it has been written in the accounts at the end of fiscal year. While, the latter, debt recovery can be an expensive way to collect your debt. You might shell out more money as compared to your debts and also, going to court can be a tedious process, it will also kill your time along. And plus, there is no guarantee that even after all this, that your debt will be recovered. Due to this, small companies often write their debts in the accounts at the end of the financial year, but still there are very slight chances of these bad debts to be recovered. So even if you are in contact with the debtor after several years and willing to do business again.

There are these debt collection service providers which help you trace the debtor, his location and his actions. These firm charges according to ‘No Recovery, No Fees’, which the client can build a work trust relationship and once all the debts are clear, the fees can be charged. This way it’s easy for the client to pay the fees.