When should a collections manager seek legal counsel?

A collections manager should seek legal counsel when a debtor files for bankruptcy because this situation involves legal complexities that can have significant implications for the collections process. When a debtor files for bankruptcy, it triggers an automatic stay, which prohibits collections actions against the debtor until the bankruptcy case is resolved. Without proper guidance from legal counsel, a collections manager may inadvertently violate this stay, leading to legal repercussions and potential liability.

Legal counsel can help navigate the intricacies of bankruptcy law, including understanding the types of bankruptcy, the priority of claims, and the proper steps to take in order to recover any owed amounts while adhering to legal requirements. Engaging legal expertise ensures compliance and protects the interests of the creditor at a time when legal considerations are paramount.

In contrast, seeking legal counsel for situations like a debtor refusing to pay, every failure in collections, or only during negotiations may not be necessary or efficient. These scenarios may not require immediate legal intervention and can often be resolved through other collection strategies or negotiations without the complexities of legal proceedings.