Debt Collection – Debunking Myths

Whether it is a consumer or commercial debt, it is helpful to have a clear understanding about debt collection.  There are a number of debt collection myths that both individuals and companies subscribe to that are simply not true.  Knowing the difference between the myths and the facts is the key to knowing how to handle debt collection.

Debt Collection Myth:
Debts cannot be collected if they are too old.

Fact…When it comes to debt collection, the age of the debt is irrelevant.  All states have laws which govern the period of time that you can file a lawsuit on a debt—this is also known as the statute of limitations; however, most of those state laws do not consider debt collection a legal action and it is therefore not subject to the same statute of limitations.

Debt Collection Myth:
Debt collection must cease if a payment is made, regardless of the amount.

Fact… This myth regarding debt collection is false today and dates all the way back to common law.  When a debtor defaults on the payment terms of their original agreement, the balance becomes due immediately.  The creditor may work out alternative arrangements to hold any action, and as long as those arrangements have also been defaulted, debt collection may commence at any time.

Debt Collection Myth:
If a debt owed is from a business it cannot be reported to the credit bureaus.

Fact… This is only true if the business is a corporation, LLC or the like and the debtor did
not sign a personal guarantee with the creditor.  Also, even though, it is a corporate debt, the
creditor may still report the debt to the company’s Dun & Bradstreet (D&B).  D&B is a commercial credit reporting agency just as TransUnion is to consumer debt.  Most commercial lenders will check a company’s D&B standing prior to extending any credit just like a bank would for a consumer seeking credit.

These are just a few of the myths regarding debt collection that a creditor, consumer and business owner/officer should research and gain a clear understanding about before any decisions are made regarding credit and collection.

Debt Collection Resources:

Debt Collection Agency

Debt Collection Agencies List

Source by Kevin Lieberman

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