Using a Lawyer vs. a Collection Agency to Collect Debt

If your letter writing, personal meetings, and phone calls have all failed to resolve a debt issue, it's time to call in a professional — a debt collection agency or a lawyer specializing in debt collection.

The most obvious choice to collect an unpaid debt is a collection agency. Agencies come in all sizes — some are local, some specialize in handling certain kinds of debts, and others are national in scope. The cost varies, depending on the volume of business you bring to the table, and the amount of debt that is to be collected. Plan on paying 25 to 30 percent of the amount collected, with some agencies demanding a 50-50 split.

A collection agency will take many of the same actions against the debtor that you have probably taken. Third-party collectors are aided by specialized phone systems, computers, and software designed to automate the process and make it more effective and cost-efficient in retrieving payment on delinquent accounts. A series of letters will be generated, sternly warning of the consequences of ignoring repayment. Phone calls will be made to deliver the same message.