Debt Collection - Buyers Guide

Debt Collection Terminology

Accounts receivable: A businesses transaction or series of business transactions that manage the billing of customers who owe money.

Bad debt: In business, this is a fiscal amount of receivables that is considered unrecoverable.

Bankrupt: A legally declared inability to pay creditors.

Collection agency: Business that charges a fee to collect debt from another company or organization's debtors.

Creditor: Party that claims another party owes it some form of capital or property.

Debtor: An individual or company that owes money to a creditor.

Dunning letter: A series of accounts receivable letters, which escalate in gravity, detailing the attempts made to collect on an unpaid debt. Often times the use of such letters serve as a legal requirement for a debt collector when they attempt debt collection.

FDCPA: Federal Debt Collection Protections Act. This is the primary US law governing the practice of debt collection.

First party: Refers to an entity that is a subsidiary of the original creditor in a two party contract.

Third party: An entity that was not one of the two original parties obligated by a two party contract. Often times, this is an independent debt collector.

Skiptracing: A debt collection method that a collection agency uses to locate an individual that has changed locations without satisfying their debt.

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