Your rights as a creditor to obtain satisfaction from the debtor depend on the type of debt that is owed to you.
There are two major types of debt:
- Secured debt – A debt that is attached to property. For example, if a debtor takes out a loan to buy a house, that loan is secured by the house. If the debtor fails to pay his mortgage, the creditor can take the house to repay the debt.
- Unsecured debt – A debt that has no attached property. For example, credit card debt is not secured by any property such as a house or car.
Unpaid Secured Debt
The creditor with a secured debt is usually able to acquire the property that the debt is secured to, often through either a repossession or foreclosure.
If the attached property is a vehicle, furniture, or large appliance, repossessing the property is a way to recover for an unpaid debt. Repossessions can be done in a number of ways:
- Hire a repossession company – Repossession companies specialize in repossessing property. If you chose to use a repossession company, it is important that you hire a reputable and bonded one. Otherwise, you could find yourself in legal trouble if they break the law.
- Let the sheriff do it – You can file a lawsuit against the debtor and have the sheriff repossess the property. This method is the safest, but it can be quite costly and take time.
- Do it yourself – While unadvisable, you can repossess the property yourself. But you cannot "breach the peace" in doing so, meaning that you must avoid confrontation or breaking the law when repossessing the property. If you do breach the peace, you can be sued by the debtor for violating their rights. This option is very risky if you are not strongly familiar with the laws of repossession in your locality.
If the attached property is a house or another form of real property, then the creditor may begin foreclosure proceedings against the property in order to have the unpaid debt satisfied through the sale of the property.
Unpaid Unsecured Debt
Collecting an unsecured debt is usually more difficult than collecting a secured debt. The first step to the collections process is to try to collect the debt yourself through reminder invoices and demand letters. If the debt remains unpaid, you can then hire a collection agency. If the collection agency fails, your last option is to file a lawsuit against the debtor.
Do I Need an Attorney to Help Me Get My Debt Paid?
There are many different legal procedures that a qualified estate lawyer can inform you of to limit your own liability, and increase your chances of collecting the debt. If you choose to go to court, a lawyer can be vital to getting a judgment against the debtor.