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Debt Collection

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Debt Collection

With the economy going the way it is at the moment, most people are struggling to make ends meet. With this being said, many companies are struggling to recover funds from Debtors who are apparently unable to pay. For some people they’re being honest, but for others it becomes a convenient excuse.

A little secret in pursuing these matters though, is that people don’t like Lawyers. We’re seen to be these scary people without conscience or care, whilst in actual fact we’re just trying to do what needs to be done. But regardless of this, nobody likes to receive a letter from an Attorney, especially when it demands payment of a debt. Fear immediately seems to engulf the Debtor; future thoughts of Court Hearings go through their heads; they are scared about further legal fees and some people become so afraid, and think that they could actually go to jail.

Depending on the type of debt owing, sometimes a Letter of Demand is not really a formality, but rather a way to manipulate the situation in favour of the Creditor. As lawyers are seen to be these ‘scary people with no sense of conscience’, this tactic very often works. It is therefore not all that surprising how often a single letter results in full payment of an outstanding debt or at least a concerted payment plan being arranged and accepted.

In instances where a debt owing is in accordance with the National Credit Act, it is then necessary for a Letter of Demand to be sent in order to begin the legal processes. In most other instances, the Letter of Demand serves 2 purposes. Firstly, it is to place the Debtor into what we call “mora”, this is really just a fancy way of telling someone that they have defaulted. The reason this is done is because there are times where a due date for payment and/or performance in the initial agreement is not clear and some form of documentation is required in order to prove that payment and/or performance is now due.

That is then established with a Letter of Demand. Secondly, there are times where the due date for payment and/or performance is clear and such a letter is merely used as a tool. It informs the Debtor that the Creditor now has Attorneys and intends to pursue the amounts owing. Some claims aren’t enough to warrant Court Processes (litigation is a very expensive route) and Creditors will try use a Letter of Demand as a cheaper alternative to obtain payment.

Should the above fail, and if the Creditor is serious about their claim, litigation may then ensue. This will begin by the issuing of a Summons; this just means that a matter is allocated a Case Number. Then it is taken to the Sheriff of the Court to serve on the Debtor.

Once the Debtor is served with the Summons, they only have 10 days to serve a Notice of Intention to Defend. If this is not done timeously, the Creditor may proceed to apply for a Default Judgment for the amount claimed. If the Debtor does serve their Notice of Intention to Defend, and if the Creditor is of the opinion that this was done merely as a means to delay the process; the Creditor may then apply for what is known as a Summary Judgment. This then requires the Debtor to prove to the Court that they do in fact have a valid defence. The downside for the Debtor is that it may disclose their defence to the Creditor who may then be able to better prepare their matter if goes to trial.

If judgment is then granted against the Debtor who then fails to pay in accordance with the Order, only then will it be necessary to start worrying about the attachment of property etc. and this becomes a whole other Court Application.

Should you find yourself in a position where you need to collect a debt from a defaulting Party, and you want someone who understands the processes; contact us. We have a separate package for collection matters in order to try reduce the costs of getting your own money back.

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