Difficult Debtors: Tips from the Front Line

Bad debts are a source of irritation, and sometimes ruin, for all companies.  According to a July 15, 2008 article by Melanie Lindner on Forbes.Com, a business can expect to collect nine out of ten dollars of a debt within the first 90 days of the due date- after that the numbers begin to plummet.  While most debtors are simply good people who have fallen on hard times, there are exceptions.  We all know the ‘professional debtor’; that person who has so much debt he or she has ceased to care.  The professional debtor has collectors knocking down his or her door while continuing to buy new clothes, go on exotic vacations and live it up.  The professional debtor is one of the most difficult debtors to deal with as he or she has a litany of excuses and tactics to turn the situation into something that’s your fault.  At Epiphany Law we’ve dealt with all kinds of debtors, either through experiences with our own various business ventures or by helping our clients get the money they’re entitled to.  We’ve heard all the excuses in the book, from the mundane to the downright outrageous.  We’ve compiled a list of tips that you can use everyday in your own business.  By using what we’ve learned, you can make dealing with difficult debtors less stressful and increase your chances of getting paid.

Be Prepared

The professional debtor is always prepared.  He or she will have a list of excuses as to why you can’t be paid right now or why you didn’t receive the payment that he or she sent last week.  The professional debtor might even go into a story detailing the many blows he or she has been dealt by life.  If you’re unprepared for these excuses, you’ll easily be blown off.  Write a list of the most common excuses that you hear and then match each one up with an effective rebuttal.  If a debtor says that he or she mailed the check, ask for the check number and the date of mailing.  If he or she says your invoice has been lost, say you’ll fax a copy over immediately and ask when you can expect the payment to be mailed.  Be sure to have all the information you’ll need ready so you can answer any questions.  Have the exact amount that’s owed, any terms or conditions of the sale, what was provided or purchased and anything else pertinent to your transaction at your fingertips.

Be Professional

Having a professional demeanor demands respect.  Treat the conversation as if it were a job interview.  Speak a bit more slowly and enunciate so you can be easily and clearly understood.  Remember that this is business, not personal.  Never raise your voice, swear, or threaten the debtor.  The professional debtor may try to fluster you or make you get angry; he or she may yell, swear, and threaten you.  Don’t retaliate.  If the debtor yells or becomes excessively belligerent, ask when a better time to call him or her would be or put the debtor on hold for a few seconds.  This gives the debtor time to calm down and, hopefully, respond to you in a more appropriate manner.

Take Control of the Situation

Don’t make the debtor go on the defensive- that won’t get you anywhere.  Using language centered around you, such as “I understand that you’re frustrated” or “I see how upsetting that would be,” instead of language centered around the debtor, like “You’re getting too upset over this” will help keep the debtor from getting defensive.  Stay focused on the task at hand.  If the debtor tries to get you off topic, be polite but always bring him or her back to the focus of the conversation- getting paid for the goods or services you provided.  Take notes every time you contact the debtor.  Keep track of what date and time you called him or her, the key points of what was said, and any promises that were made by the debtor.  This will come in handy if you have to contact the debtor again.

Get a Commitment

Do not end the conversation without summarizing the results.  Reiterate what he or she has committed to (payment amount, payment plan, etc.), your expectations (receiving payment by X date), and the consequences if the debtor does not follow through (turning the matter over to an attorney, etc.).  Depending on your relationship with the debtor, it may be a good idea to follow up with a letter recapping the conversation.  If the debtor still fails to follow through on his or her commitment to pay you, you must make sure to put your consequences into action.  If you constantly issue empty threats, the debtor will never take you seriously.

As with any situation, use your best judgment when deciding how to handle a debtor, and consult an attorney if needed.  However, don’t allow yourself to feel there is a stigma associated with collecting money that is rightfully owed to you.  The bottom line is that you have a contract, the goods or services were delivered and you have a right to expect payment.  If you have questions about collections for your business, call us at (920) 996-0000.

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