Creditor’s Incentives
The creditor’s primary incentive is to recover funds that would otherwise be lost if the debtor filed for bankruptcy. The other key incentive is that the creditor can often recover more funds than through other collection methods. Collection agencies and collection attorneys charge commissions as high as 40% on recovered funds. Bad debt purchasers buy portfolios of delinquent debts from creditors who give up on internal collection efforts and these bad debt purchasers pay between 1 and 12 cents on the dollar, depending on the age of the debt, with the oldest debts the cheapest. Collection calls and lawsuits sometimes push debtors into bankruptcy, in which case the creditor often recovers no funds.
Read more about this topic: Debt Settlement
Famous quotes containing the word incentives:
“Perestroika basically is creating material incentives for the individual. Some of the comrades deny that, but I can’t see it any other way. In that sense human nature kinda goes backwards. It’s a step backwards. You have to realize the people weren’t quite ready for a socialist production system.”
—Gus Hall (b. 1910)