Debt collection occurs when creditors want to secure apayment from a person or businesses, that they havepreviously been unsuccessfulin obtaining. Once the creditor cannot get their payment from a debtor even after multiple attempts,they will usually get a debt collector involved.Hiring a professional will save you from the headache of chasing the debtor, and a debt collection agency will have more experience and skill in this area.

A debt collection agencyalways needs to know and be aware of the legal obligations within their field. The Australian Competition and Consumer Commission (ACCC) and Australian Securities and Investments Commission (ASIC) has jointly produced a debt collection guideline to assist creditors, collectors and debtors in understanding their rights and obligations. These guidelinesare to ensure that alldebt collection activity is carried outconsistently and in linewith consumer protection laws.

However, what if a debt collector is also struggling to get the payment from a debtor, what can they do within the law, from here?

  1. Final Notice Letter

The first thing that a debt collection agency will do is send a final letter of notice to the debtor, to advise them that this is final notice of payment. This will normally be after they have received 2-3 friendly reminders already, through either email, letters or a phone call.

  1. Letter Of Demand

If a debtor doesn’t respond to the notice or the response is not good enough according to the debt collection agency, then the next step a debt collection agency will likely take is to send a letter of demand asking for immediate full payment. Until the debtor paysthe debt in full,they will keep receiving calls or emails from the debt collector within the legal obligations.

However, if you can’t make the full payment, you can talk with them to negotiate payment options.

  1. Negotiating Payment Plan

A debt collection agency will likely negotiate a payment plan with a debtor, if their response is that they cannot pay it all upfront. The agency will always be willing to help find a suitable payment method for you, as all they want it for you to pay, no matter how it goes about. There are various types of negotiations when it comes to payment that you can expect, including signing a legal repayment agreement with regular instalments, or a discount if you pay immediately.

  1. Legal Proceedings

If you don’t respond to any notices or demands, or if the debt collector feels that negotiation plans aren’t working,they will start legal proceedings.

They will collect all the necessary documentation required to get back all debt and take you to court. This will usually increase the amount you owe, as it won’t just be the debt amount, but the debt collection agency will file a “Statement of Claim” for the debt amount, debt collection costs and interest of the debt, for you to pay.

Once a court proceeding has commenced, you will have 28 days to pay the debt or file a defence. The debt collection agency can ask a court to pass a judgment against you if you don’t show up tocourt.

  1. Affect Your Credit Rating

If the court passes judgment against your or your business, it will be recorded on acredit reportas a default which will impact your future ability to take loans or get a credit card, until the judgment is removed. You will need to talk to the debt collection agency and come to an agreement to remove a default or take legal action.

  1. The Police Can Seize Your Property or Business

The debt collection agency can apply for the court to issue a warrant against you. If the court passes judgment against you, a court sheriff will visit your house or business, seize and sell your property to pay your debts.