Navigating Debt in A Post-COVID World: How Collections Agencies and Individuals Must Adapt
It’s been a hectic few years on the economic front.
From the shaky first days of the COVID-19 pandemic and the havoc in the economic system still ongoing, to the supply chain shocks and Russia’s war in Ukraine, it has been a time of deep economic uncertainty.
These crises had–and continue to have–a significant impact on individuals and businesses around the world. As many lost their jobs and saw their income reduced, it is likely that a large percentage accumulated debt during this time, furthering the financial struggles up the chain as more and more businesses had to contort themselves to stay afloat, despite their outstanding receivables.
As economies begin to recover and adapt to the current moment, businesses will be looking to collect what they are owed, but it’s important to consider how debt collection practices may evolve in a post-COVID world and how individuals and businesses can manage their debt.
Debt collection practices have traditionally been viewed as harsh and unforgiving, but as the world adapts to the new normal, the collection industry will need to evolve to be more compassionate and flexible.
As collections agencies, our job is to represent the interests of our clients who are looking to collect what is owed to them and recover as much of it as possible.
Collection agencies will need to take into account the fact that many people and businesses have been hit hard by the pandemic, and may not be in a position to repay their debts in full or at the pace creditors are used to.
One way in which collection agencies can evolve is by offering some form of a settlement that would involve a more flexible repayment plan. Rather than insisting on a fixed repayment schedule, collection agencies may need to consider allowing debtors to make smaller, more manageable payments over a longer period of time. This could involve negotiating a lower interest rate or waiving fees.
Another way in which collection agencies can adapt to the current moment is by offering debtors a reduction in the overall debt if the full balance is paid in lump. This involves the debtor agreeing to pay a lump sum amount that is less than the total amount owed. In some cases, this may be the only viable option for debtors who are struggling to make payments, and the only way a business can expect to see any of their money back. Collection agencies can be the conduit and work with both sides to negotiate a settlement that is reasonable and manageable for all parties involved.
Communication is also key, and never more important than it is right now. It’s crucial for collection agencies to be transparent and open in their communications with debtors. This means providing clear information about the amount owed, the payment schedule, and any fees or penalties that may be incurred. It also means being open to questions and concerns from debtors and providing them with accurate and timely information about their debt.
For individuals and businesses struggling with debt, there are several steps that can be taken to manage their debt effectively. Proactively communicating and working with your creditors offers the best chance at a reconciliatory solution.
The first step is to assess the situation and determine the total amount owed. This can be done by reviewing credit reports and contacting creditors to obtain a full picture of the debt.
Once the amount owed has been determined, the next step is to create a budget that takes into account all income and expenses. This will help to identify areas where expenses can be reduced and savings can be made. It may also be necessary to consider increasing income by taking on additional work or selling assets.
Once a budget has been established, it is important to prioritize debt repayment. This may involve negotiating a repayment plan with creditors or seeking the assistance of a credit counseling service. In some cases, it may be necessary to consider a debt consolidation loan or a balance transfer credit card to simplify payments and reduce interest rates.
Finally, it is important to maintain a positive attitude and stay focused on the goal of becoming debt-free. This may require making difficult decisions and sacrifices in the short term, but the long-term benefits of debt freedom are well worth the effort.
With a good-faith-first approach from creditors, debtors and collection agencies, it is possible to manage and clear debt effectively, even in an uncertain economic climate, and achieve financial security for all parties.Last modified: March 28, 2023
Shaya Gorkin is an experienced attorney and the COO of Monetaria Group, a premier collections agency specializing in merchant cash advance and commercial debt recovery. To connect with Shaya, email email@example.com