As with any industry, there are business advisors or debt settlement companies that evaluate a company’s finances and make suggestions to help ease the debt. The goal is to keep the company operating. They can negotiate with creditors or not. Fees paid can be either contingent upon a deal with a creditor or paid up-front.
For some, debt settlement is a choice they make before out-of-court liquidation or bankruptcy.
Must you accept an offer from a debt settlement company as a creditor? The answer is no.
Must you negotiate with your customer or the debt settlement company? The answer is no.
Should you consider a debt settlement? Maybe.
If someone owes you money, a debt settlement company may contact you or your collection attorney. They want to help your non-paying customer resolve the debt.
First of all, it’s important to understand how debt settlement companies work to resolve commercial accounts receivable. With this knowledge, you can decide whether you should accept an offer or accelerate the debt collection process.
How a debt settlement company works.
While debt settlement companies look to reduce the amount owed, settle for a percentage of the outstanding amount, or attempt to work out a payment arrangement for part of the debt or the entire amount of it.
A business using a debt settlement company may pick and choose the accounts payable that they want to reduce. They need not settle all monies owed.
Fees can vary. With some, retaining a third-party debt settlement company to intervene may not have any upfront costs. Therefore, the non-paying customer has nothing to lose by employing a debt settlement company to attempt negotiation.
For debt settlement companies that do not work on a success basis or are different in that they work in an advisory capacity, there may be a different fee arrangement with upfront costs charged to your customer.
In a situation we had where the debtor was radio silent, didn’t respond to the client’s demand or ours, our client authorized litigation. Upon service of the summons, the debtor engaged a debt settlement company to intervene on their behalf.
Contact, in this case, is not unique.
The debt settlement representative will make an initial offer upon those authorized by their client, your debtor. If the offer is not acceptable to you, the creditor, you can decline the offer, as you can any offer. If you decline the offer, your debtor can increase their offer. Ultimately, it’s up to you whether to accept it.
- Should you choose to work with the non-paying customer’s debt settlement company, a creditor should request clear substantiation for accepting the deal.
- It’s worth stating that if the parties agree to a payout in settlement discussions, the first payment should be immediate.
Sometimes the intervention by a third party leads to a successful resolution of the claim or case. Sometimes not. And, sometimes there are those that have no intention of settling the claim. Their engagement of a third-party debt settlement company is probably another attempt to delay.
In conclusion, whether to accept an offer made by a debt settlement company on a non-paying customer’s behalf should include consideration of many factors including a true picture of the debtor’s underlying financial situation, the legitimacy of the debt consolidation company, whether all creditors received the same offer, the offer itself and more.
We have years of debt-collection experience. Part of that experience is routine interaction with debt settlement companies. We know how to close cases in a way that best suits our clients and each situation they find themselves in. Get in touch with us and we can explore the best way to proceed.