Techniques Used For Recovery Of Debt

recovery of debt It is quite simple to understand what is bad debt but it may be quite difficult to recover a bad debt. In simple terms, a debt that has turned bad is known as bad debt. Bad debt is a loss to the business concern and hence some techniques have been developed over the years to recover bad debt.

If you are into a debt or are thinking about taking a loan, then you need to be aware of the techniques that can be used by the business firms to recover their debts from you.

Techniques Used For Recovery of Debt:

Some of the techniques used for recovering debts are legal but some of them may also be illegal. Hence, you should be aware about the various methods of debt recovery.

Written Reminders

Once your account has become due, you can receive a written reminder from your creditor. They will initially encourage you politely to pay off the debt. They do this with the motive of recovering their due debts and also to have a record of their attempts showing that they had tried to collect the outstanding debts from you. This helps them in the future if any issue arises. They may allow you an estimated time period to pay your due payment.

Creditor Contact

Along with written reminders, your creditor can also contact you via telephone calls, and emails. These are the primary techniques adopted by the creditors to recover their debt. They will remind you time and again that you owe them a debt that has to be paid off.

You cannot avoid their calls or stop their emails because it is their right to do so. They can call you as many times as they wish and can send you several emails stating that you owe them a debt that has not been cleared off yet.

Your creditor can call you frequently during the day time but law does not permit the creditors to contact their debtors at odd hours. Therefore, you will not receive phone calls very early in the morning or late at night.

Also remember that they will never try to threaten or harass you while contacting you because these acts are strictly prohibited under the Fair Debt Collection Practices Act, FDCPA. But if the original creditor is trying to recover the debt from you then this act will not apply.

Wage Garnishment

This is a technique used by the creditors to recover their debt when their debtors refuse to pay off their debts even after repeated requests made by the creditors to do so. Therefore, if you don’t respond to the recovery reminders and phone calls made by your creditor positively and don’t pay off your debt then your creditor can take a step further and sue you and file a request with the court requesting to garnish your wages.

If your creditor wins the court judgment and receives a court order for wage garnishment then it can order your employer to hold back up to 25% of your pay and redirect the amount to your creditor during every pay period. It can also allow garnishing your bank account instead of your wages. But this technique of debt recovery is not allowed by all the states.


Although, lawsuits are the last resort adopted by the creditors for recovering their debts, they have the right to file suits at any time after you have legally evaded the payment of your loan.  Your creditor will file lawsuit in the state where you live. After your creditor files the suit, you will receive summons from the court and you will have to appear in the court.

Most people try to settle the case after receiving the summons. They try to make some other arrangement or enter into a payment plan with their creditor and avoid attending the court and fight legally.

Techniques Used For Recovery Of Debt

Photo Credit:

If this is done then the debtor can escape the hearing of the court. But if the debtor ignores the summons and does not appear in the court then your creditor will win the case. In this situation, you may have to pay the full amount of debt owed along with legal fees.

Bank Levy

The creditor can impose a bank levy, similar to wage garnishment, after a lawsuit. In this case, your creditor will serve the order on your bank. As a result, the bank will freeze all your accounts and will deny you access to your own account.

After this, your bank will hand over all the non-exempt funds lying in your accounts to your creditor. Certain exemptions related to a bank levy are: commercial creditors like credit card companies or hospitals cannot seize your unemployment, child support and federal benefits.

Outsourcing to Third Party Collection Agencies

When the creditors fail to recover their debts from their debtors then they may hire a third party collection agency to recover the past due balance for them. Under the Fair Debt Collection practices Act, debt collection agency is an expert that recovers due debts on behalf of others. A collection agency is especially experienced in the area of recovering money that is due.

It uses different techniques to recover dues from customers, who have failed to pay their dues. A collection agency is thorough with the laws, regulations and the guidelines governing the industry. It acts on behalf of your creditor and will follow the necessary steps to recover the debt owed by you.

It is prudent choice to pay the debt owed by you to your creditor without creating any fuss. This is because you cannot abscond for long and will be caught by the debt collection agency if they use the skip tracing method. It is a detection technique that is used by the debt collection agencies to find and locate an absconding debtor.

Real Estate Lien

It is a technique used by a creditor for debt recovery. This type of lien limits a debtor’s capability to make any profit by the sale of his/her property without paying off his/her creditor’s lien. In order to enforce real estate liens over his debtors, a creditor must win a lawsuit against the property owned by his debtor.

Photo Credit: