Most people are understandably scared of debt collection. It’s not a situation they want to find themselves in, any time. Ironically, if you’re looking for some clues about good practice in debt management, a debt collection agency is perhaps the best possible source of information.

Debt collection agents aren’t really very interested in the dreaded “repo” scenario. Nor are their clients, the lenders. The whole object of debt collection is to get the money back. Lenders don’t want lose money. Debt collectors get better results by achieving positive outcomes, not getting some tiny percentage back out of the debts.

The positive approach

As a matter of fact, debt collection agencies earn their reputations and are hired on the basis of their ability to achieve good recovery rates. It’s better business for everybody, including the borrowers.

A positive approach to debt collection is best described as:

• A viable, realistic approach to the actual debt situation
• Good planning of adjusted repayments
• Simple, clear, and well organized money management concept

Most borrowers get into difficulties simply because they’re in a financial situation where they can’t manage their finances effectively. Extra expenses, spending at the wrong time, or other pretty basic things are enough to derail debt repayments.

The idea of positive debt collection techniques is to make it easier for the borrower to repay. The most common way of achieving this result is rescheduling. The simplest, and by far the most effective way to deal with all the borrower’s financial issues is to create a reliable, workable schedule for repayments which takes the pressure off the borrower.

Most borrowers are surprised to find that the first things that happen in this process are entirely for their benefit:

The debt collection notifies the debtor and invites contact to discuss the issues. At this point, the debt collection agency also spells out the fact that the issue is repayment of the debt.

The debtor contacts the debt collection agency and explains the problems. Most of the time the issues are missed payments, rather than the whole debt, and the debtor wants time to repay. The debt collector reports to the creditor.

Under instructions from the creditor, the next stage is to reschedule repayments. In nearly all cases except those of chronic failure to repay monies owing, debt repayments are tailored to meet the debtor’s current financial issues. The new schedule is designed to deal with any additional amounts to which the creditor is entitled under the terms of the loan.

The best outcome for both parties is a budget approach is worked out in consultation between parties. A debt repayment of $1000 a month, for example, can be scaled back to $500. That means that the debtor will pay more over time, but also makes the budget a lot more manageable, and increases the ability of the debtor to repay faster if circumstances permit.

Forget what you’ve seen on TV. The only reason debt collection agencies repossess or recommend court action for recovery is when the better options haven’t worked. A debt collector can get you out of trouble.

Debt recovery procedures like you see on TV or in the movies are the last resort, not the first.