Financial hardship.
Financial hardship will strongly affect how a debtor will react to being chased. As a debt collector, I understand that the majority of debts were never intentional to begin with. Life changes and unforeseen circumstances get in the way of payment. Financial hardship is never the plan for any debtor, nor is it our goal to let these debts fade away.
To get blood from stone you must use tact, understanding and meaningful agreements to resolve. The result may not be the usual way to an outcome, but it may be the easiest and cause the least stress on you, your bank account and other parties involved.
Ways that debtors react to being chased while financially unstable.
Run and Hide.
If they don’t have the money to pay you, they likely don’t have the money to pay others. Debtors will react to being chased by attempting to delay payments. You will either receive silence or have the debtor avoid the matter altogether. They can be afraid of confrontation with creditors as they are unable to meet their payment obligations.
Excuses galore.
You have numerous failed promises or vague agreements that never come to fruition. 3 months down the track a dispute is raised without any warning. We suggest the debtor could be having issues getting paid for the job, thus delaying paying contractors. Another possibility is that there are other ATO or court matters outranking you as the number one priority.
Out of options.
Another way a debtor will react to being chased is an apathetic submission that nothing can be done. There is no hope in their mind as they are too deep in debt to see a way out. “Take me to court, I don’t care” is a sad response to hear from someone who is no longer looking for a solution. Emotions are either nowhere to be seen, or abundant for the person at the end of their rope. It is comforting to know that we can help even in these hardest situations to not only recover costs but to help these debtors get back on their feet.
What to do.
Meaningful agreement.
One of the best things you can do to resolve a debt is to arrange a meaningful agreement suitable to the debtor’s situation. This is not an instruction to bow to every debtor’s requests. This is a suggestion to recognise when a payment plan is better than going through court to get roughly the same agreement.
Statute of limitations.
As full payment may be slow to receive, it’s important to keep the debt active. If you continue to rely on verbal promises, you are at risk of running out of time to collect the debt. The statute of limitations may render the debt “forgiven” if enough time passes. The general rule is you have 6 years from the invoice date, last payment, admission of debt in writing or a court judgement, to chase your invoice. This varies from state to state and in different circumstances, so if you are unsure, contact us!
Statement of financial position.
I’m not too fond of lies, it’s my pet peeve. A statement of financial position (SOFP) can be a surefire way to get written confirmation of the real situation behind the debtor. Debt collectors are allowed to request this from a debtor before court action, however, it is not enforced.
Further action.
In the grand scheme of things, a debtor can only pay what they have and further action is used to either confirm a payment plan or bankrupt/liquidate the debtor. We can provide the tools and avenues to achieve a result, however, we strive to avoid the latter as both parties may not win through this.
Each situation is different and we always advise on the avenues available so you may make an informed decision. Whether you work with us or elsewhere, we will work to give you the options to take moving forward.