I have quite a number of debtors in to 1k to 20k range. These aren't really cost effective to sue in courts or go through the hassles of a Small Claims Tribunal. Was wondering if hiring of Licensed Debt Collectors do help? Are their success rates high and will I be sued for harassment?
I'm not sure how it works in Australia, but if the laws are similar to those in the UK then you might have some luck using a debt collection agent. The difficulty you may have is: 1. the debt is probably unsecured 2. the debt collectors have no more legal powers than you although they may use more forceful methods such as constant telephone calls, doorstep visits (if legal), and threats of court action to attempt to recover the debts. If they are attempting to collect against a someone who knows the law and their rights they probably won't get very far. Ultimately the only recourse open to you will be the Court. With a succesful court action you are more likely to get your money back but it could be a drawn-out process. I'm speaking purely from a UK perspective, but I imagine the laws are applied in a similar manner in Aus. Best thing you could do pay for 1 hour of a solicitors time to get the low-down on what options are available to you.
I've heard that debt collection agencies take a huge chunk of whatever money they recover. At least in the U.S. -- I don't know about other countries. I wonder if you can sell those debts to an investor willing to buy them (and deal with the deadbeats); I'm not sure if you need to be a securities broker for this or not. Can I ask how you acquired these debtors? Are they bankrupt .com companies who didn't pay you for your services?
They probably could but they would be bought at a rate of between 5%-15% of the outstanding value. The original creditor would get that small percentage but the investor would still be able to pursue for the whole amount. A smiliar thing happens with many credit card debts where the credit card company doesn't actually own the debts that you run up on their cards. It's called securitisation. The credit card company simply manage the debt on behalf of the people they sold the debt to. If you don't pay your credit card bill eventually the credit card company will pass the debt onto a debt collection agent who may purchase that debt for a tiny fraction of the outstanding amount. When that happens, the credit card company don't lose out because they don't own the debt (it was securitised) but they get to write off the full balance against tax, the debt collection agent pays around 15% of the total outstanding balance and then goes on to attempt to collect the full outstanding amount making them a potential 650% profit. Even if only 1 in 5 eventually pay (and a much higher percentage than this do) they still more than double their investment.
Many of these cases will not be taken. Debt collectors won't do small claims cases for $1,000 because the costs of trying to collect are going to be more than the percentage. Want to get even? File the case, get a judgment, take out a lien, and let it sit against the debtor. Otherwise... good luck. It's a problem where you might have to screen people before accepting them and extending credit.