When to hire a collections attorney and best ways to collect money in-house

Updated October 17th 2023

Sometimes, you need to hire a collections attorney. Collections are a time-consuming and costly process, but they're also an important part of being a business owner. When handled correctly, collections can be used to improve your cash flow and increase profits in the long run. Before hiring an attorney or trying to collect money yourself, however, there are questions you'll need to ask yourself. How much money is owed? Is this a one-time payment or part of an ongoing debt? Do you have the time and resources needed for this project? The answers to these questions will help determine whether hiring a collections attorney is right for your company’s situation—and even if it's worth it.

How to determine when to hire a collections attorney

When you're dealing with a large amount of debt, or if the debtor is uncooperative and doesn't respond to your collection efforts, it may be time to hire a collections attorney.

• A collections attorney can help you collect money from debtors who have declared bankruptcy or who are in bankruptcy proceedings. If your debtor has been unresponsive and no longer answers your emails, phone calls or letters, then hiring an experienced collections attorney may be necessary. 
• If there's any dispute over whether the debtor owes money , then hiring an experienced collections attorney is crucial because he/she will know how best to approach this situation given all possible scenarios that could occur during litigation -- including whether it's better for both parties involved if they settle out of court rather than go through potentially lengthy legal battles. 

There are many reasons why a company might require the services of a third-party collection attorney or agency

For example, if a company is too small to have the resources to manage collections or if a company’s core business is in another area, then it makes sense to outsource this function.

Another reason could be that you want to focus on your core business and not spend time on collections. In some cases, companies need specialized expertise in order to collect from certain types of clients (for example: delinquent debtors who owe money on student loans). This is where third party collectors can really help out.

Large companies may have employees whose sole responsibility is to pursue debtors, but they may not have the right tools or expertise to manage complex cases. The business may also need to outsource debt collection because the company is growing rapidly and needs more resources in order to manage collections.

What to consider when hiring a debt collection attorney

If you're a business that needs to collect on outstanding debts, there are a few things to consider before deciding whether or not to hire a third party.

• Cost: The cost of hiring an agency or an attorney can vary widely depending on the size and complexity of your account receivables portfolio. While many agencies offer fixed-fee packages, others charge by the hour or on a case by case basis (e.g., per recovery). Be sure that you understand all associated costs before signing on with any collections company.
• Time required: Because most collections law firms have more than one client, they often require several days notice before beginning work on your behalf so they can schedule their resources appropriately across multiple clients' accounts receivable portfolios--so don't expect immediate results. However, if time is tight and immediate attention is required for an account in danger of going bad quickly due to delinquency or fraud risk factors (such as identity theft), then working directly with an expert may be better suited for this type situation where speed matters most over price tag savings potentials.

When you should hire a collections attorney

You should hire a collections attorney when:

• You have a legal dispute with the debtor. In this case, it's better to have an attorney on your side because they can help keep track of the court proceedings and ensure that everything goes smoothly.
• You need to collect money quickly (and across state lines). If you're dealing with a large amount of debtors and need funds immediately, hiring an attorney may be worth it because they will likely be able to get results faster than if you tried collecting in-house or using another method like debt collection agencies. 

What types of fees can a collections lawyer charge?

The fees a lawyer charges are determined by their experience and the complexity of your case. The most common types of fees are hourly, flat fee or contingency fee.

Contingency fees are usually reserved for complex cases where there's a good chance you'll recover damages in court. The attorney only gets paid if they win your case, so it's important to understand how these work before agreeing to one. Flat rates tend to be better for simple matters like a collection letter or filing paperwork with small claims court; however, some attorneys will charge higher flat rates if you have multiple debts that need collecting from different debtors (this is called "multidistrict" collections).

When you should use in-house collection methods

When you have a large number of cases or debts that are similar:

If you have a large number of cases or debts that are similar, in-house collection methods may be the best way to go. For example, if your company has 1,000 accounts receivable and each one is owed $1,000 by a single debtor, then it would make sense for your organization to handle the collection process internally rather than hiring an outside attorney whose time could be better spent elsewhere.

When you need to collect on a regular basis:

If there's no real urgency around collecting debts--or if the debtors aren't in dire straits themselves--then utilizing internal resources makes sense because they're already familiar with how things work within your organization and can move quickly without having to learn a different process or approach. 

Why in-house collections are best for certain cases

If your case involves a relatively small amount of money and/or the debtor is willing to pay, in-house collections may be the best option. This can be especially true if you do not have any legal background or experience with collection law.

In these situations:

• The debtor has assets that can be liquidated (e.g., property or vehicles) and sold to pay off the debts.
• The debtor has a steady income from which payments could be taken.

Conclusion

In conclusion, when it comes to collecting money, taking the right legal actions at the right time is important. There are times when hiring an attorney is appropriate and other times when using in-house collections methods may be better. If you're unsure whether or not you need a collections lawyer, we can help. Contact us today for more information on how we can assist with your case at no cost or obligation.

Updated October 17th 2023
Author: Brendan Gilbert