- Home
- Bankruptcy and Bankruptcy Code
- Business Entities
- Departmental Operations
- Credit Practices
- Collection Practices
- Legal Remedies
- Accounts Receivable; A/R; Accounts Receivable Administration
- Basic Collection Procedures
- Collection Agencies
- Collection Time Line; Scheduling Collection Follow Ups
- Debt Collection Tips; Collecting from Delinquent Customers
- Consumer vs. Commercial Collections
- Deduction Management; Deduction Write Off; The Deduction Management Process
- Documentary Collection Process, Documents against Payment; Documents Against Acceptance
- Documentary Collections Frequently Asked Questions
- Dunning Notices; Past Due Notices; Friendly Reminders
- Humor in Debt Collections
- Improving Collection Performance
- Monthly Statements; Monthly Customer Statements
- Negotiating With Delinquent Debtors
- Personal Visits; Advantages and Risks; Costs and Benefits
- Debtor Referral to a Collection Agency
- Telephone Collections, Telephone Tips; Collection Tips; Collection Tools
- Transferring Collection Assignments
- Partial Payments
- Skipped Invoices
- Alternative Dispute Resolution Options
- Partial Debt Forgiveness as a Debt Collection Tool
- Payment Plans; Extended Payment Plans
- Myths and Misconceptions about Business to Business Collections
- Understanding the Role of the Accounts Payable Department
- Using a Customer's Uncertainty as a Collection Tool
- When to Place an Account for Collection
- Selecting a Third Party Collection Agency
- Credit Holds
- Account Assignments
- Issuing a Final Demand
- Quality vs. Quantity of Collection Calls
- Confronting Delinquent Debtors
- International Debt Collection
- The Power Balance in Debt Collections
- Ten Truths about Business Collections
- Complete Text of the FDCPA
- Financial Analysis
- Financing Methods
- International Credit
- Laws and Regulations
- Payment Methods
- Performance Measures
- Security Instruments
- Career Management, and Job Change
- Credit Website Tools
- Upcoming Educational Events
- Credit and Collections Tools and Tips
- Tips on Creating Better Emails
- Generating Effective Credit Correspondence
- Exporting
- Accounting
Partial Debt Forgiveness as a Debt Collection Tool
If a debtor company is placed for collection with a third party collection agency, the creditor company can expect to pay contingent collection fees ranging from 15% to 30% of the amount collected. One alternative is to offer the debtor company an "out" meaning an alternative to being placed for collection. That "out" involves an incentive to pay the outstanding balance rather than having the account placed for collection.
The creditor offers the debtor forgiveness on a portion of the balance due in return for immediate payment. If used correctly, debt forgiveness actually can save the creditor company money. For example, if a creditor normally pays a 22% contingent collection fee but is able to collect by offering a 15% discount to the debtor in return for immediate payment of the balancedue, the creditor (a) improves collection results by 7% and (b) is paid sooner rather than later.
Some creditor companies may reject concept out of hand. Others may consider and reject it, but a small number may consider this unusual idea to be worth considering.
© 2011 by Michael C. Dennis. All Rights Reserved