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Debt Collection Cycle

What is the debt collection process?

There are several different methods by which debt collection agencies collect unpaid debts. There is a difference in the speed with which they act, the attitude with which they contact you, and the subsequent actions they may take. This means we cannot tell you exactly what will happen or when if you become insolvent, but we can generalize what to expect.

Life Cycle of a Simple Debt

Skip tracing: A professional debt collection agency will usually conduct skip tracing to confirm a debtor's identity and contact information. The collection agent can also use this to determine the best way to contact a debtor. Suppose a collection agency is unsuccessful in identifying a debtor's contact information. In that case, they might have to contact a family member first.

Soft collection: A common approach adopted by many debt collectors is, to begin with, "soft collection" tactics to increase the probability of recovering the debt quickly in a friendly and convenient manner, without causing upset to the debtor.

A debtor can expect to receive a non-aggressive collection letter and a few telephone calls during this stage. Often, suppose a debt is paid within this grace period. In that case, they can avoid the debt being reported to their credit report.

Follow Up:

Suppose the account has not been settled within the initial stage. In that case, a collection agency may become less friendly and slightly more aggressive. Emails, letters, and phone calls are to continue in stage two, but at this point, a debt is likely to be reported to the credit bureaus.


Communication is likely to increase in frequency and aggression, including threats of legal action. Suppose it hasn't already happened. This is when a debt collection agency will consider taking legal action and seriously damage their credit.

Legal Action:

Suppose the collection agency has been unable to get the debtor to pay their debt, especially if the debtor doesn't want to communicate or is disputing the debt frivolously, or if the debtor is unwilling to negotiate a fair settlement or payment arrangement. Then, the collection agency will perform a thorough investigation to determine its next steps in most cases.

In many cases, depending on the state where the debtor resides and other factors, the agency will consider filing a lawsuit and taking enforcement measures such as obtaining a writ of execution to levy the debtor's bank account.

Debt Collection Cycle

Debt Collection Process

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