Law firms charge for services in different ways. You have some that charge hourly, which can far surpass the recoveries. Charging on a contingency basis means that the law firm only tacks on a fee if they can recover money. Someone who requires debt collection services benefits from this through collecting debts and knowing that they will get money on it. The agency charges a percentage on what he collects.
No Collection, No Worries
When you hire a law firm with the hourly wage model, you could pay for a debt that never gets collected. Contingency debt collection only requires a payment if they can recover. Along with getting rid of your nervousness, it motivates the agency to work harder because their payment depends on collecting the debt. No money recovered means no payment to the collector.
When Does It Make Sense?
You have some cases where a contingency collection law firm makes sense. For example, do you have a debt over 120 days past due? A contingency collections law firm will take actions like sending letters, calls and negotiations. As a last resort, they will take legal action, but this costs more to do. Because contingency collect lawyers earn a percentage of what they collect, they want as much money from it as you do.
Two Key Factors to Consider
Two key factors will influence the collection: contingency fees and collection rates. The collection even goes beyond this, but for the sake of understanding, we’ll examine this. These two elements work against each other in some cases.
First, let’s have a look at the collection rate. This looks at the track record of success from a debt collection law firm. You calculate the collection rate by dividing the successful number of collections versus the total number of collections. Successful rates don’t always mean success. In some cases, it highlights whether a law firm took on the difficult collections. Sometimes, they cherry-pick only the easiest collections. It makes their rate look better than the reality.
Now let’s look at the contingency fees. A common model in debt collection, you negotiate the contingency fee with the lawyers before they begin the collections. Beware of how like with collection rates, contingency fees have the potential to mislead. Choosing the lawyer with the lowest contingency fees can turn out to be a huge mistake. What percentage gets paid won’t have relevance if they don’t collect on it.
You don’t want a contingency fee where they take advantage of you, but you don’t want unrealistically low numbers either. Usually, establishing a healthy middle ground is your best bet. You want them to produce results.
At Massachusetts Debt Collection Attorneys, we have offered our services in the debt collection business for a combined total of 50 years. We have experience collecting on some of the hardest debts. Especially someone new to business, they may have no experience in collecting debts. They don’t want to spend hours running in circles with clients who owe them money. You can waste hours that you could have used productively. Hiring us frees up your time so that you don’t get buried collecting debts when you could do better things.
Let’s have a look at the difficulties in collecting a debt. Debtors will often refuse to answer the phone, won’t respond to emails and may even close their office before they’ll pay a debt. You have to know to finagle with them, which requires experience. Our lawyers know how to do this skillfully. We will aggressively pursue debts on your behalf so that you can free up your time for more productive things.
Demand Letters: How They Work
In some cases, issuing a demand letter by itself can initiate the collections process. Your lawyer will analyze the situation to see if it makes sense. Where a demand letter does the trick, you may see a reduction in the contingency fee. Many times, they will lower this to below 25 percent.
Court Costs to Recover
Debt collection lawyers initiate the court proceedings to collect a debt only as a last resort. They have cases where they don’t have a choice. Collecting the debt would be next to impossible if they didn’t take it to the court system. You will have to pay the associated court fees. That only happens if they manage to collect the debt. You won’t pay anything if the attorney doesn’t collect on the debt.
Write It off for Tax Season?
Many businesses try to write off their debt collections as expenses for their business come tax season. You can reclaim lost revenue when the customer fails to pay but should you? Contrary to popular belief, you don’t get favorable treatment for unpaid debts. You won’t receive a single tax benefit for doing this.
The cost to hire a debt collection attorney Boston law firm does matter, but as you can see, you have other things to look at. Many times, speaking with a lawyer like this won’t cost anything. You don’t have to give up hope that you can collect on a debt. Even with a contingency fee applied, you have to look at it as a debt that you may not have collected on at all. Speak with experts who can outperform the rest at Massachusetts Debt Collection Attorneys.