Here Are Some Tips From A Debt Collector.
“My debtor made a payment arrangement with me; however, I am concerned that they will not be able to keep to it? I’d prefer it if they settled the balance in full.”
Along with all the changes in the world and the way we have had to adjust our lifestyle, we have also had to change the way we deal with debt. If you have a client who cannot pay your full account and wants to pay the account off monthly, there are obviously some risks involved.
The fact that the debtor made an arrangement with you is a good sign, however, this poses a risk with regards to whether they will be keeping to the arrangement every month or not. Furthermore, this also creates a burden for you in that you must follow up on the arrangement every month.
This can cause a relationship to go sour very quickly and create animosity, especially if they keep changing the arrangement. Perhaps then it is better to try get them to pay the full balance once off.
Realistically, however, the debtor probably cannot settle the account once off, hence they reached out to you to make an arrangement. So, what now? Let us have a look at how you can try get your debtors to settle and why it is important to get the payment in before it’s too late.
Here are 3 tips on how you can get your debtor to settle their account:
- They probably have some capital at the time of making the arrangement, otherwise they would not have made the arrangement.
When your debtor makes a payment offer, they probably do have some capital available and they might be negotiating payments terms with all their creditors. This makes it an ideal time to negotiate settlement. Offer a discount but make it worth their while too. Remember, the longer the payment terms the higher the risk gets. It might feel like you are losing the percentage the discount equates to, however, if the debtor’s financial situation does not improve, the likelihood of them paying you on time and as arrangement becomes less likely too.
- Give a few settlement options, this will increase the likelihood of them paying.
Give your debtors options: Give at least 3 options, so for example, 10% discount if paid within 30 days, 15% if paid within 7 days, or 20% if paid the same day. This way the debtor feels accommodated and that they feel like they are getting a good deal. You are getting a lumpsum once-off, and no headaches of monitoring payments monthly. See our article on how to negotiate payment terms
In terms of the new court rules, Mediation Rule 41A now requires parties to mediate the matter before full blown litigation takes place. There have been many cases which have dealt with the importance of meditation in Law matters in general. The most common judgment in this regard is the case of Brownlee v Brownlee, adjudicated upon in the South Gauteng High Court in Johannesburg by Acting Judge Brassey. The case of Brownlee v Brownlee made noise about the goodness of mediation and went a step further by capping the fees of the attorneys in this case because they had failed to advise their respective clients of mediation at an early stage. Find out why courts push for Mediation.
- Put everything in writing!
Once you have agreed on the settlement amount, put it in writing. Use your letterhead if you have one. Put in the original balance, the discounted amount, the parties, and the date. Make the payment terms clear. For example: “the original balance due is R10,000. The settlement amount is R8,000 valid until the 1st of August 2020. Should the settlement not be paid, the full balance will be due for payment.”
Make sure that the date that is on the letter and that both parties sign the letter. This way both parties feel protected and catered for. Make a note to remind your debtor the day before that the payment is due, that their payment is due. Be as friendly as possible in your approach!
If you feel that you need assistance in negotiating a settlement, contact our offices and we will gladly assist.