Business & Finance Bankruptcy

What Happens If a Collection Agency Doesn't Collect Money Due?


    • Some collection agencies work on commission. They receive account contracts from clients, such as credit card companies and hospitals. When their collection attempts succeed, they keep a percentage of the amount collected. If a collection agency repeatedly fails at collecting debt, it risks losing its clients.


    • Collection agencies that purchase debts, rather than working in conjunction with other creditors, have the right to sell unproductive accounts to other agencies. A given account can be bought and sold by collection agencies indefinitely.


    • A collection agency reserves the right to write off any uncollected debts as losses on its company taxes. When this occurs, the company doesn't sell the debt. Rather, it uses the value of the debt as a tax deduction. Should a collection agency choose to write off an uncollectible debt, it must send the debtor a Form 1099-C. The debtor then must claim the written-off amount as income and pay taxes on it.

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