Why use an attorney instead of collection agency to collect debt?

You work hard to satisfy your customers, dedicating yourself and your company to delivering high quality products and great customer service. When the work is complete, the next step is collecting the money for your hard work. What happens when a customer refuses to pay? What do you do after you have made the calls requesting payment or even extended the offer of a payment plan?  Trying to collect a debt on your own is draining on your company’s resources and time.

Determining the best way to collect your debt is important, and selecting the right process is paramount to an efficient recovery. There are many factors to consider in making this determination. Whether you should hire a law firm or a collection agency depends on the size of the debt, the size of your business, and the time in which you want to see a recovery.

First, how large is the debt?

A collection agency typically can handle an account as small as $50.00.  While a law firm handles larger amounts, the basis for acceptance of the debt is determined on the size of the law firm and the amount they are willing to accept.  Typically, a solo practitioner or a small firm will accept delinquent accounts amounts starting at around $500.00 while larger firms won’t accept debts under $1000.00.

Second, how soon do you want collections to start?

Debts placed with law firms are sued far quicker than those placed with collection agencies. When a law firm receives a debt, they are able to immediately draft a letter, usually called a verification letter, in order to verify the debt.  When a consumer sees this letter, on law firm letterhead, the advantage is twofold.  One, seeing a letter on legal stationery will motivate your debtor to pay up. Two, if you are willing to take the client to court, it is the first step in putting the legal action in front of the consumer.  Agencies are able to refer the debt to a law firm, but since agents work on a commission, they earn far less if they refer the file to a firm. Sometimes, this means that your collection can sit in an agents pile for months before it is handled appropriately.

Third, how much will it cost to collect?

One advantage to using a law firm is that firms typically work on a contingency basis for debt recovery.  This means that if the law firm is unable to recover, you don’t owe the law firm money.  Additionally, most law firms’ contingency fee is roughly between 25-33%. Collection agencies charge customer fees based on the age of the debt and will charge you additional fees if the agency has to turn the debt over to a law firm.  When the agency has to combine its efforts with a law firm, you can expect to pay a 50% fee.  Agencies charge a premium to use their services, as their staff is familiar with debt collection laws, and services usually run between 35-50% of the debt.


A law firm is set up to send out the verification letter, the demand letter, with or without a draft complaint attached, obtain a judgment and get cash in an efficient manner for a lower fee.  A collection Agency is able to make calls and write letters, but typically charge more, and have to refer the file to a law firm when filing suit is appropriate. 

Whether you choose a law firm or collection agency to handle your delinquent accounts, these are the points you should consider in making your decision. Adding to your bottom line by choosing the manner of collection that is best for you is what matters. 

Good luck with collecting what is yours.

About the Author, Margaret E. Cooper | Attorney at Margaret E. Cooper LLC

Margaret has a strong track record of success in debt collection for all sizes of companies.  Margaret’s familiarity with the Debt Collection process began five years ago working on the consumer side against debt collection reporting agencies.  Margaret began her career as a consumer attorney in 2001, and now heads her own law firm, collecting debts for a variety of small, medium and large businesses. 

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