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Understanding your collection rights as a creditor

On Behalf of | Jan 15, 2024 | Commercial Disputes |

Payment collection is rigorous process for creditors, especially since some situations require assertive negotiation and legal reliefs to secure claims and rights.

Whether you are representing a credit union, bank, business or are an independent lender, it is important to know your creditor rights and understand the processes for available reliefs.

Creditor rights and reliefs

Some of the key collection rights and remedies available to creditors include the following:

  • Extending demand letters and calls: As long as you follow the rules and regulations set by the Fair Debt Collection Practices Act (FDCPA), you can contact debtors through phone calls, letters and other communication methods to request payment of their outstanding balance.
  • Filing lawsuits: If a debtor fails to pay their obligation, despite the adequate payment reminder and requests, you can file a lawsuit in either small claims court or in a higher court, depending on the amount of the debt. If you win the lawsuit, the court will issue a judgment against your debtor.
  • Enforcing judgments: In connection to the previous remedy, once you obtain a judgment from the court, you can enforce it through various methods, including wage garnishment, bank account levies and property liens.
  • Repossessing and foreclosing properties: In case your debtor secured their debt with a collateral, such as a vehicle or property, you can repossess their asset if they fail to make payments.
  • Submitting claims to bankruptcy court: If your debtor files for bankruptcy, you can submit your claim as a creditor with the court instead of pursuing your usual collection activities.

As a creditor, it is important to understand that these rights and reliefs come with specific procedures and are subject to limitations, such as limits on collection activities. Moreover, debtors have rights as well, which you, as a creditor, should be adequately familiar of.

To ensure you are protecting your creditor rights while staying within the bounds of the law, you can seek guidance from a legal professional to assess your situation and guide you toward a suitable remedy.