What is the difference between debt collection and debt recovery?

Debt collection and debt recovery are very similar terms. Both involve trying to recoup money that’s gone unpaid, but the crucial difference involves who is trying to chase the debt payment. With debt collection, the creditor is chasing the debt themselves. With debt recovery, they enlist the help of a third party.

Let’s take a look at both options in more detail:

Key terms

Debtor – the person who has borrowed money, and has to repay it

Creditor – the individual or business which has extended the credit with an agreement and payment schedule

What is debt collection?

If you miss a payment for a loan or credited service, your creditor (i.e. the person or company that you borrowed the money from) will soon be in contact to prompt you to make the payment.

This is debt collection. The ‘chasing’ of the debt is kept ‘in-house’, and may take the form of emails, phone calls and letters – all directly from the creditor themself.

Most larger businesses have a department dedicated to pursuing debts, and will usually step in around 30 days after the payment is missed. If they are unable to make progress with the debtor, they may either opt for debt recovery using a third party (see below), or may elevate their claim to the courts.

Businesses choosing to take a debtor to court should make sure they’ve completed the ‘Pre-Action Protocol’ before submitting a claim.

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What is debt recovery?

If the creditor attempts to contact the debtor several times, but they still don’t pay the money they owe or set up a payment plan, the creditor may enlist the services of a third party to help recover the debts.

This is debt recovery – a third party, acting on behalf of the creditor to recoup the money owed by the debtor.

What does this mean for the debtor? Once they’ve been contacted by a third party debt collection service, this will be recorded and impact their credit score. A debt collection agency will first try to contact the debtor by phone or letter, and will then start the process of bringing a court case against them.

If you find yourself in debt, you mustn’t ignore contact from a debt collection agency, even if you can’t pay the money back straight away – it will only make matters worse, and failure to show up for your court hearing will result in the judge automatically ruling against you.


What is bad debt?

Bad debt is the term used to describe debt that is unable to be recovered. This could be because the debtor has gone bankrupt or is experiencing financial problems, or because it cannot be collected for some other reason. This makes the debt effectively ‘worthless’.

How long can a debt be chased for in the UK?

The short answer is that debts in the UK are written off six years after the last contact was made between the debtor and the creditor, provided the creditor hasn’t obtained a County Court judgement (CCJ).

However, as you might expect, it’s not quite that clean cut in practice. If the creditor can prove they’ve taken reasonable steps to contact the debtor during these six years, they may be able to obtain a County Court judgement later on. And if the debt is a crown debt (court fines, council tax etc.) it won’t be voided after the six years regardless of whether contact has been made.


Lucy heads up the team on Expert Market, helping to deliver industry-leading expertise on business topics for nearly four years.