Debt collections terms

1. Creditor: The individual or entity that extends credit or lends money, expecting to be repaid.
2. Debtor: The individual or entity that owes money to the creditor.
3. Collection Agency: A third-party company hired by a creditor to pursue and collect debts from debtors.
4. Debt Recovery: The process of pursuing payment of debts owed by individuals or businesses.
5. Delinquent Account: An account that has not met its payment obligations within the time frame specified in the contract or agreement.
6. Charge-Off: A declaration by a creditor that an amount of debt is unlikely to be collected, indicating that it considers the debt a loss.
7. Payment Plan: An arrangement where the debtor agrees to pay back the owed amount over a period of time in installments.
8. Settlement: An agreement in which the debtor pays a portion of the outstanding debt, and the creditor forgives the remaining balance.
9. Credit Report: A detailed report of an individual’s credit history, prepared by a credit bureau, which creditors use to assess creditworthiness.
10. Fair Debt Collection Practices Act (FDCPA): A U.S. federal law that limits the behavior and actions of third-party debt collectors attempting to collect debts on behalf of another person or entity.
11. Bad Debt: Debt that is not collectible and is therefore worthless to the creditor.
12. Skip Tracing: The process of locating a debtor who has “skipped” or moved without notifying the creditor, often used in the context of debt collection.

Understanding these terms is crucial for anyone involved in the debt collection process, ensuring proper communication and legal compliance.