Not all days are alike. Every business faces the problem of debts someday. Sometimes situations go out of hand, and the consumer debts turn to solve their cases with commercial debt collection laws. Some agencies are appointed to recover bad debts on behalf of the business houses known as Commercial debt collection agencies. As these agencies’ work is delicate, they need to be protected under commercial debt collection laws. These regulations protect businesses in commercial debt from any ill-treatment by creditors and debt collection agencies. Under these laws, the creditor, debt collection agencies, and debtors have rights.
Role of a Commercial Debt Collection Agency
The work of a commercial debt collection agency is to collect the bad debts by various tactics-
- Certified demand letter- The business’s first nature to communicate with the debtor is issuing a formal letter stating the loan’s details, due date, and the amount to be paid.
- Negotiation- Debtors sometimes authorize the agency to make payment arrangements with their clients. There is a possibility of an installment plan or a discounted payoff if the balance is paid in full.
- Besides demand letters, routine phone calls are a formal way to start a conversation with the debtor. Usually, phone calls are the standard way to talk to debtors.
Privileges are Given to a Business Debtor under Commercial Debt Collection Laws.
Although commercial debtor losses his rights as a consumer debtor still the law protects him for specific grounds like
- Exemptions on goods- The same way an individual with consumer debt enjoys the immunity of a particular asset from the support list as a search satta matka of creditors like cars, homes, and other assets. There is no need to file for bankruptcy to attain this benefit.
- Negotiation with creditors- The opportunity to talk to the creditor with viable business plans to smoothen things over. As a creditor only wants to get his money back soon.
- Bridge financing-Changes in time generally lead to cash flow problems in businesses. The creditor is sometimes ready to extend the loan payment time or give additional funding on loan after judging the business’s condition. There are chances that the company has the potential to earn but is only facing working capital problems.
- Dissolution- The creditors cannot touch the individual’s assets if the loan has been taken as a business identity unless they have signed as a guarantor for the loan. In these situations, the Dissolution of the business is the solution to clear the debt.
- Declaring Bankruptcy- There are two types of bankruptcy options available here-
- Chapter 7 – In this business does not cease to exist and finishes all its operations.
- Chapter 11- The business accepts the debt to become profitable again.
Usually, people File for chapter 11.
To Sum it
Commercial debt collection laws are governed by the Commercial Collection Agency Association, a non-government entity that comes under the Commercial Law League of America. These agencies cover only commercial debts and not consumer debts. They have no jurisdiction over non-members. But these laws help protect delicate matters as commercial debt smoothly.