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Strategies for Facing Non-Payment

Facing non-payment can be a challenging situation for any business. In this article, we will explore strategies for dealing with non-payment, including recovery systems, litigation as a recovery strategy, and collection rates and fee structures. By implementing these strategies, businesses can improve their chances of recovering funds from debtors and minimizing financial losses.

Key Takeaways

  • Implement a 3-phase recovery system for non-payment to maximize chances of fund recovery.
  • Consider litigation as a recovery strategy after thorough investigation and assessment of the case.
  • Be aware of the costs and fees associated with legal action for non-payment before making a decision to proceed.
  • Tailor collection rates based on the number of claims, account age, and account value for effective debt recovery.
  • Understand the options and recommendations provided by recovery agencies for non-payment cases to make informed decisions.

Recovery System for Non-Payment

Phase One

Within the first 24 hours of initiating the recovery process, a multi-faceted approach is deployed to signal seriousness and prompt action. Immediate contact is established through a series of four letters, leveraging the power of US Mail for formal communication. Concurrently, skip-tracing and investigative measures are undertaken to unearth the most current financial and contact details of the debtor.

Efforts intensify with daily attempts to reach a resolution via phone, email, text, and fax. The collector’s persistence over the initial 30 to 60 days is crucial. Should these attempts falter, the strategy escalates to Phase Two, involving our network of affiliated attorneys.

The goal is clear: establish contact, convey urgency, and seek resolution. If unyielding, the process advances, ensuring no stone is left unturned in the pursuit of recovery.

Phase Two

Upon escalation to Phase Two, the case transitions from our internal recovery efforts to the hands of a specialized attorney within the debtor’s jurisdiction. Here’s what unfolds:

  • A series of demand letters are drafted and sent by the attorney, signaling a heightened level of seriousness.
  • Concurrently, attempts to reach the debtor intensify with phone calls aimed at securing payment.

Should these measures not yield the desired outcome, a strategic decision is required. We provide a comprehensive analysis of the case, outlining potential next steps and the likelihood of successful recovery.

If progress stalls, we prepare for Phase Three, where the possibility of litigation is assessed. The choice to pursue legal action or to continue with standard collection activities rests with you, the client. Our transparent fee structure ensures you are informed of potential costs upfront, with no hidden charges.

Phase Three

At the crossroads of Phase Three, the path forward is clear-cut. Decisive action is required based on the comprehensive evaluation of the debtor’s financial landscape and the likelihood of recovery. Should the prospects appear dim, a closure recommendation is prudent, absolving you of any financial obligation to our firm or affiliated attorneys.

Conversely, if litigation is advised, you’re at a pivotal decision point:

  • Opt out and withdraw the claim at no cost.
  • Continue standard collection efforts.
  • Commit to legal proceedings, incurring upfront costs averaging $600-$700.

In the event of litigation, upon payment of initial fees, our attorney will aggressively pursue all owed monies. Failure to recover does not result in additional charges.

Our fee structure is competitive and varies with claim quantity, account age, and value. For instance, accounts under one year are subject to a 30% fee for 1-9 claims, while 10 or more claims reduce the fee to 27%. Older accounts and those under $1000.00 or placed with an attorney incur higher rates.

Litigation as a Recovery Strategy

Considerations for Legal Action

Before leaping into litigation, weigh the prospects of recovery against the costs involved. Assess the debtor’s ability to pay—a critical step to avoid throwing good money after bad. Consider the following:

  • The debtor’s financial status and assets.
  • The size and age of the debt.
  • The jurisdiction and associated legal fees.

Litigation is not a one-size-fits-all solution. It’s a strategic decision that hinges on the specifics of each case.

Legal action entails upfront costs, typically ranging from $600 to $700. These may include:

  • Court costs
  • Filing fees

Remember, these are sunk costs if the attempt to collect fails. However, if you decide against litigation, you can opt for standard collection activities or case closure, with no additional fees owed.

Costs and Fees

Understanding the financial implications of litigation is crucial. Initial legal costs can be a determining factor in the decision to pursue legal action. These costs typically include court costs and filing fees, which can range from $600 to $700, depending on the debtor’s jurisdiction.

When opting for litigation, upfront payment of these fees is required. This investment initiates the legal process, covering the essentials to file a lawsuit on your behalf.

It’s important to note that if litigation does not result in recovery, the case is closed with no additional fees owed. This no recovery, no fee structure aligns your interests with those of the firm, ensuring a mutual commitment to the case’s success.

Here’s a quick breakdown of potential costs:

  • Court Costs: $600 – $700 (varies by jurisdiction)
  • Filing Fees: Included in court costs
  • Attorney Fees: Contingent on recovery

Remember, these are estimated figures and may vary based on specific circumstances. Always consult with your legal advisor to get a detailed understanding of the costs involved in your case.

Decision Making Process

When faced with non-payment, the decision to litigate is pivotal. Assessing the debtor’s ability to pay is crucial before incurring legal expenses. If the likelihood of recovery is low, it may be wise to close the case, avoiding unnecessary costs. Conversely, if litigation is recommended, upfront legal costs must be considered. These typically range from $600 to $700, depending on jurisdiction.

Costs are not the only factor; the potential to recover the full amount, including legal fees, is essential. A structured approach to decision making can be outlined as follows:

  • Evaluate the debtor’s financial status.
  • Consider the age and value of the account.
  • Review the estimated legal costs and fees.
  • Weigh the probability of successful recovery against potential expenses.

Making an informed decision requires a balance between the prospects of recovery and the financial implications of legal action.

Remember, if litigation is unsuccessful, you owe nothing further to the firm or affiliated attorney. This no-recovery, no-fee structure is designed to align the firm’s interests with your own, ensuring that legal action is only recommended when it is in your best interest.

Collection Rates and Fee Structure

Rates Based on Number of Claims

Volume matters. The more claims you submit, the more negotiable your rates become. Bulk submissions can lead to significant savings on collection fees. Here’s a quick breakdown:

Number of Claims Accounts < 1 Year Accounts > 1 Year Accounts < $1000 Attorney Placed
1-9 30% 40% 50% 50%
10+ 27% 35% 40% 50%

The sliding scale is designed to incentivize clients to consolidate their collection efforts. As the number of claims increases, the percentage of the amount collected decreases, making it more cost-effective for clients with multiple accounts receivable issues.

Remember, the age and value of the account still play a role in determining the final rate. But when it comes to the number of claims, more is definitely less.

Rates Based on Account Age

The age of an account is a critical factor in determining collection rates. Older accounts often signify a higher difficulty in collection, leading to increased rates. Here’s a breakdown of how rates can vary:

  • Accounts under 1 year in age: Lower rates due to higher likelihood of recovery.
  • Accounts over 1 year in age: Higher rates as they typically require more resources to collect.

The longer a debt remains unpaid, the more challenging and resource-intensive it becomes to recover. This is reflected in the fee structure, incentivizing early action on delinquent accounts.

For a more detailed perspective, consider the following table outlining the fee differences based on account age:

Account Age 1-9 Claims 10+ Claims
Under 1 year 30% 27%
Over 1 year 40% 35%

It’s essential to understand that these rates are not just numbers; they represent the effort and strategy required to successfully recover funds from accounts of varying ages. As the account ages, the likelihood of successful recovery diminishes, justifying the higher collection rates.

Rates Based on Account Value

When assessing collection fees, the value of the account plays a crucial role. Higher-value accounts often warrant lower percentage rates, reflecting the increased potential return on successful collection efforts. Conversely, smaller accounts may incur higher rates due to the proportionate cost of recovery efforts.

Account Value Collection Rate
Under $1,000 50%
$1,000 – $10,000 40%
Over $10,000 30%

This tiered structure incentivizes the recovery of larger debts, aligning the interests of the collection agency with those of the creditor. It’s essential to understand that while higher rates for smaller accounts may seem punitive, they are reflective of the necessary resources expended to recover such debts.

The goal is to balance the recovery process with a fee structure that is fair and encourages the pursuit of all debts, regardless of size.


In conclusion, facing non-payment can be a challenging situation for any business. However, by following a structured approach like the 3 phase Recovery System outlined in this article, companies can increase their chances of recovering funds owed to them. It is important to assess each case carefully and consider the recommendations provided, whether it involves closure of the case or proceeding with legal action. Understanding the costs involved and the potential outcomes is crucial in making informed decisions. Ultimately, having a clear strategy in place and working with professionals in the field can greatly improve the recovery process.

Frequently Asked Questions

What is the Recovery System for Non-Payment?

The Recovery System for Non-Payment consists of three phases: Phase One involves sending letters to debtors, skip-tracing, and contacting debtors for resolution. Phase Two includes forwarding the case to affiliated attorneys for legal action. Phase Three offers recommendations based on recovery likelihood or proceeding with litigation.

What are the considerations for legal action in non-payment recovery?

Considerations for legal action include assessing the possibility of recovery, costs and fees involved in litigation, and the decision-making process of whether to proceed with legal action or continue standard collection activity.

How are collection rates and fee structures determined for non-payment recovery?

Collection rates are based on the number of claims submitted, account age, and account value. Rates vary for different scenarios, such as the number of claims, account age, and whether accounts are placed with an attorney.

What are the costs involved in proceeding with legal action for non-payment recovery?

The costs of legal action include upfront legal fees such as court costs and filing fees, which typically range from $600.00 to $700.00 depending on the debtor’s jurisdiction. If litigation fails, there are no additional costs to the client.

How does the Recovery System handle cases where recovery is unlikely?

If recovery is deemed unlikely after investigation, the case may be recommended for closure with no fees owed to the firm or affiliated attorney. Alternatively, if litigation is recommended, the client can decide whether to proceed with legal action or standard collection activity.

What are the collection rates for different scenarios in non-payment recovery?

Collection rates vary based on the number of claims, account age, and account value. Rates are higher for accounts placed with an attorney and differ for accounts under 1 year in age, over 1 year in age, and under $1000.00 in value.


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