When to Hire a Collections Attorney vs. Using a Collection Agency

Choosing the right commercial debt recovery approach from the beginning is critical in determining whether you get paid and to what extent. 

A collection agency applies persuasive communication methods and reminders to enforce payments, often resorting to legal action when all else fails, and through a third party litigator. Debt recovery attorneys, on the other hand, send demand letters as notification for possible legal action and court-mandated enforcement. 

In this article, we discuss how collection attorneys vs. collection agencies handle commercial debt recovery and why it’s ideal to work with a law firm.   

How Collection Attorneys vs Debt Collection Agencies Operate

A collection attorney is a legal professional who specializes in debt recovery, especially for businesses, because they deal with credit often. They typically begin the process with soft collection methods, such as demand letters and negotiations. When this fails, the goal is to have direct legal recourse available to enforce recovery. If you’re anticipating a dispute or the debtor has violated certain contractual agreements, a collection lawyer is your best bet to resolve everything under one roof.

With a collection agency, the emphasis is on enforcing repayment rather than recovering through legal action. Collection agencies are ideal for same-state smaller debts that don’t involve commercial disputes or debtor issues, such as bankruptcy. A collection agency’s main tactic for debt recovery is persuasive and persistent communication, such as sending multiple letters and initiating phone calls. They may use other collection methods, such as buying off the debt and transferring the entire recovery burden to them, or reporting defaulters to credit bureaus.

While a collection agency can also initiate legal action against a debtor, it’s often through a third-party collection law firm, and occurs as a last resort later in the recovery process.

The main difference between how a collection attorney and a collection agency operate is that a lawyer is likely to file a lawsuit after the initial demand letter goes unanswered, while an agency may explore other communication channels before taking legal action. 

When to Hire a Collections Attorney vs. Use a Collection Agency

The nature and circumstances of your commercial debt determine the recovery approach you choose. Typically, you hire a collection lawyer when:

Taking Legal Action

Work with an attorney if you’re looking to take legal action against a debtor. While it’s always recommended to explore inexpensive and less aggressive recovery methods before escalating a case, specific circumstances may necessitate a lawsuit, including:

• Previous demand letters and communication have been ignored.
• The debt amount is significantly high.
• Other creditors are filing lawsuits to claim the debtor’s assets.
• The deadline for suing regarding the debt is approaching.
• The debtor plans to file for bankruptcy or leave the state

In such instances, you need a professional who can start the commercial collections litigation process as fast as possible without needing to catch up with the facts of your case. 

A collection agency can initiate legal action in some cases, but it’s easy to miss the warning signs of a non-performing debt until it’s too late. Filing a debt recovery lawsuit through an agency also introduces another party in the process, which can be overwhelming for a creditor.

Enforcing a Court Judgment

When you win a debt recovery lawsuit, the court issues a judgment outlining other ways to collect what you’re owed. Common legal remedies to reclaim non-performing debt include:

• Asset seizure
• Property liens
• Wage garnishment
• Bank levies on debtor’s accounts
• Till taps
• Repossession of security instruments
• Asset turnover orders

Unfortunately, debt recovery orders are only as effective as their judgment enforcement. After judgment, the creditor, either through an agency or a law firm, is solely responsible for the collection. The court isn’t generally involved in the enforcement unless it issues further orders for uncooperative debtors. 

Even with a judgment in place, a collection agency’s ability to promptly enforce and collect what you’re owed is often limited. A debt recovery lawyer presents a firm front and understands other legal approaches to encourage unresponsive debtors to pay.

Recovering Debt Across Jurisdictions

A collection attorney is better equipped to handle debt recovery across states because they understand cross-state commercial law and can directly initiate legal action without needing a proxy. 

They also have additional litigation tools to process such collections, including the Uniform Enforcement of Foreign Judgments Act, which allows the transfer and enforcement of a judgment across different states. Only a licensed collection attorney can initiate and oversee this domestication process.

While collection agencies can also recover commercial debt across state lines, they still rely on soft communication tactics and negotiations, which tend to be ineffective in prompting fast payments. If this fails, the agency forwards the case to a collection attorney in that jurisdiction to litigate and obtain a court judgment. This means they act as an intermediary, and the creditor might have to correspond with yet another team.      

Resolving Commercial Debt-Related Disputes

Some commercial debts arise from business disputes, such as contract breaches, fraud, and bankruptcy. Conflicts associated with a debt can complicate and delay the recovery process. A collection lawyer has the expertise and experience in all aspects of commercial law to help businesses resolve such disputes and recover debt.  

For example, if your manufacturer fails to deliver pre-ordered clothes made from a high-quality material as agreed and is unwilling to correct the error, the manufacturer is in breach of contract and owes your company money. Navigating such cases requires an understanding of commercial contracts law to litigate the breach before moving to the debt recovery phase.

Commercial debt-related conflicts may also qualify for monetary damages when a business incurs significant financial loss due to the misperformance of another. These are some of the necessary legal actions a debt recovery attorney can advocate for to ensure you’re rightfully compensated. 

With a law firm, you can also rest assured that you’re following the legal and most ideal course of action. A law firm can help you avoid counter lawsuits and increase your chances of repayment.

Preserving Your Reputation

Some collection agencies use overly aggressive debt recovery methods, which can leave a bad taste in business relationships. Their collection methods can, sometimes, border on harassment because they’re too focused on repayment through constant nudges and persuasion.

Collections attorneys offer a firmer and more professional approach to commercial debt recovery, including a comprehensive analysis to identify which debtors are likely to pay after a demand letter and which may require legal action.

Lawyers are also bound by numerous state, federal, and American Bar Association laws that require them to handle these cases with the professionalism required.

Weighting Your Debt Collection Efforts

Hiring a commercial debt collection lawyer gives more weight to your recovery efforts because they have the authority to take legal action and enforce strict judgments, such as asset seizures and wage garnishment. This signals to a debtor that the creditor is serious about recovering and is ready to involve the court. It’s also likely to raise recovery rates and set standards for timely repayments in the future.

While debt recovery agencies are persistent and persuasive in their repayment reminders, stubborn debtors may dismiss them as less serious, routine collection attempts. Recovery rates, therefore, remain low for such borrowers, and non-performing obligations continue to pile up.

The Global Legal Law Firm advantage

 At Global Legal, we believe that even the most prominent companies must be held accountable for the funds they owe other businesses. Our attorneys have fought and won numerous debt repayments across the country in state and federal courts. When you partner with us, you get the Global Legal advantage of:

• Experience honed over decades of practice: We have established ourselves as complex litigation experts for commercial collections locally and across the nation since 2008. With our legal team, you get tried-and-tested debt recovery solutions likely to surpass your repayment goals. 
• Infrastructure and skills to handle large non-performing accounts: Whether you’re dealing with merchant cash advances or factoring agreements, our collection attorneys have sharpened their skills to oversee and litigate large delinquent accounts. Our focused high-pressure litigation approach lets debtors know we mean business.  
• Flat fee payment basis: Our flat fee payment structure offers predictable and lower upfront costs, which brings certainty to your budgeting, especially if you’re handling high-volume debtor accounts.   
• Direct communication with account directors: We know how important it is for businesses to turn non-performing debt into revenue. Therefore, we don’t leave you to speak with only sales personnel about your account. You’ll always have a direct communication channel with your debt recovery account director for prompt updates.  

Streamline Commercial Debt Collections With Global Legal

From debt collection analysis to judgment enforcement and recovery, Global Legal performs for you to get repaid as quickly as possible. Unlike collection agencies, we understand when to send a demand letter and when our high-pressure litigation skills are better applied for debt recovery. 

Ready to take your commercial collections a notch higher for better recovery rates? Contact Global Legal for a case review.