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An overview of the complexities of Debt Collection

You have heard the terms civil litigation & debt collection, but have you ever wondered what the terms entail exactly?

What is debt collection?

Debt collection is the collection of unpaid debts on behalf of a client.  In our debt collection department, we act for individuals as well as commercial entities in recovering debts cost-effectively and efficiently.  Our objectives are not only to protect our client’s assets and minimalise losses but also to provide a solution, which assists in promoting our client’s business.

Questions most often asked by clients include the fear of losing clients when a debt is handed over and the right time to hand over accounts.

No business or professional can afford to have bad debt, as it slows growth and expansion and reduces cash flow.  The reasons why debtors neglect to pay are because they do not have the money to pay you or bluntly refuse to pay.  In our experience, it is advisable to hand the debt over sooner rather than later, to

increase the chances of recovery – the debtor may change his address without notifying you if you do not act expediently, creating the need to make use of the costs of a tracer, which will in return increase your costs of recovery, and it may also create the idea that you have forgotten about the money that the debtor is owing to you.

Some debtors also have a constant need to make use of your services and due to the outstanding account are forced to make use of an alternative provider.  The quicker you manage to rehabilitate the debt, the quicker the client will be back at your doorstep, giving you the option to render the services to him again.

It is advisable to hand over accounts that are older than 90 days – by then you have already expressed your concern by sending out monthly accounts to the debtor and the debtor has already broken the terms and conditions of the credit granted to him.

Why make use of attorneys?

It is proven that the minute an attorney’s firm gets involved in the debt collection process, the debtor knows that collection of payment has now become a reality and priority, and the sooner he pays, the lesser the pressure.

How do we operate?

We follow a hands-on approach with regard to debt collection, and our services include inter alia

  • assisting our clients in assessing debts before handover, as to advice on the chances of recovery thereof;
  •   providing our clients with a successful debt reduction strategy, a credit application form, and other documentation, to assist them in debt recovery;
  • visiting the debtor at home to discuss the outstanding account, when necessary;
  • phoning the debtor and necessary following-up phone attendances;
  • sending of a registered detailed letter of demand to the debtor, explaining the steps that will follow should he not pay;
  • listing debtors at ITC;
  • sending out a summons to the debtor, which is served by the Sheriff of the Court and the taking of judgment against the debtor;
  • issuing and serving warrants of execution against movable and immovable property;
  • summonsing the debtor to appear in court in terms of section 65 of the Magistrates’ Courts Act 32 of 1944;
  • issuing emoluments attachment and garnishee orders.

Our fee structure

Our clients have a choice of fee structures with regard to debt collection, which is discussed in detail with each and every prospective and existing client.  This usually includes the payment of only expenses not recovered from the debtor.  We, however, take every necessary step to ensure that the debtor is responsible for all expenses and fees incurred. 

What happens when the debtor defends the matter?

Should the debtor defend the legal action against him, then a detailed defended civil litigation procedure is followed, in accordance with the Rules of Court.  Although certain time limits have to be adhered to in a defended matter, we take every necessary step to ensure that the matter gets resolved in the shortest time possible, by strictly following the Rules of Court.

The monetary limit of the Magistrate’s Court is R100 000-00, which means that should the debtor not have agreed in writing to the jurisdiction of the Magistrate’s Court, a claim with a capital value of more than R100 000-00 will not be dealt with by the Magistrate’s Court.

Although the courts usually follow previous decisions, referred to as precedents, to avoid uncertainty and confusion, the outcome of each matter will depend on its own circumstances and merits.  Therefore, thorough preparation is required to ensure the best outcome for each individual matter.

You will seldom need to attend court, as debtors/defendants usually prefer to settle the claim before wasting their time in court, especially if they know that they will lose the case.

Requirements before we can start the debt collection process

We will obtain proof from the client of a valid debt, which includes the following:

  • Detailed copies of invoices, statements, and delivery notes
  • Copies of any written agreements, bank statements if necessary, and any written acceptance by the debtor of the agreement between yourselves

We also need any information regarding the debtor and the debt, including:

  • The capital amount outstanding
  • Details of any interest and costs added by you
  • The transaction date or the date when the debt became due and payable
  • Detail of all payments made by the debtor
  • Residential and work addresses and contact telephone numbers, identity number of the debtor if available

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