Are you tired of chasing your customers/clients, and they are still not showing any chance of paying back the debt they owe you?
Then, maybe, this is the time to pursue legal action against them. Taking the money from someone with a false promise of paying them back in the future is illegal.
You can sue the debtor if they don’t comply with your mutual-agreement. But collecting your debt through court is not always the brightest idea, sometimes the debtors can file for bankruptcy; other times, they can ask for a later deadline. Therefore, it is always advisable to exhaust all your options before planning such a move.
Let’s say what actions you can take to recover your debt faster and safely.
Fun Fact: An average American has over $6,354 in credit card debt, around $24,700 in non-mortgage debt, including loans for cars and other items, while the average student loan peaks to $34,144, according to Experian.
Did You Send Them Written Reminders?
It is essential to send written reminders to your debt or if you feel that they have defaulted on your loans. Start by sending them written reminders periodically, only threaten of legal action if you are ready to take them to court (it is inadvisable in the beginning)
Personally Speaking to the Debtor – One Last Time
Maybe there is some genuine reason the debtor is not paying your debt. In such a case, you both can make rearrangements on how the debtor can pay you. It can be either in instalments or through the selling of his property.
Your options are open and unlimited. The purpose of a final meeting is to reach a fruitful conclusion that both parties can agree to.
It is essential that you:
- Tell them about the debt they owe you
- What actions you can take against them if they don’t comply
- What action you have taken so far and they still haven’t complied
- You should record all the points with your for future reference
- If both the parties reach a mutual agreement, draft a new agreement with precise details, as that will be part of your record in case the other party defaults
- Make sure you don’t meet the person alone and have two witnesses during the discussion present with you
You should avoid:
- Getting into a heated argument over the debt
- Threatening them of legal action if they don’t follow up
Asking for Mediation to Settle Dispute
If both parties are unable to reach a mutually agreed solution, it is better to take help from the mediation services.
In some countries, governments have mediation centres available where both parties can reach an agreement. However, many private companies also provide mediation and dispute settlement services. These mediation services will charge fees from the affected party or the party that called on them.
The solutions provided by the mediation services are usually the quickest, cheapest, and less stressful for the affected party.
Most county courts recommend that both parties settle their disputes through mediation before going to court.
You can always take your case to court if mediation doesn’t work out in your favor.
Use a Solicitor
If you are not able to recover the debt through the mediation agency, in most cases, they will assign you a solicitor or refer you to one they know of. This is because the other party is no longer agreeing to your requests. Therefore, it is now the duty of a solicitor who is experienced in debt recovery to take up your case.
The solicitor will take a fee for his/her services and write a letter to the person who is indebted to you. The letter can include legal actions against the debtor.
Taking help from a solicitor is also essential if you plan to take legal action in the future. The letter from the solicitor will define a clear plan of action and will apprise the other party about it.
Get Help from a Debt Recovery Agency
You can also get help from debt recovery agencies who specialise in this kind of work. The debt recovery agencies have access to a variety of legal plans that you can use to pursue the debtor.
From taking services of a debt collector to employing a solicitor for the legal course of action, a debt recovery agency is your final resort before taking the other party to court. Debt recovery agencies charge either a fixed amount or single-digit percentage of the money they collect on your behalf.
The benefit of hiring a debt recovery agency for your debt collection is that they have legally trained staff available for all plans of action.
Send a Final Warning aka Letter Before Warning (LBA)
If all else fails and it comes to taking the other party to court, then you must send a final warning letter, also called the Letter before Warning (LBA). The letter is the final notice letter and will include:
- The money debtor owe to you
- In how much time he/she should pay you
- What you will do if you do not receive the money within the given time frame
- You should also mention that all the proceedings and follow up suits, including the court fee, will get added in the final debt amount.
Recovering Debt through Court
It is advisable to seek independent legal advice to collect your debt from the debtor. Do note that the court should be your last resort to taking payment. When you plan to take the other party to court, a few things to remember include:
- The court proceedings can take months
- There is no guarantee that you will win the case
- You may have to pay for the other side if you lose the case
- If the other side can’t pay, it will be next to impossible to collect your debt
- If you win the case, apply for Enforcement of Judgement office so that they can recover the money on your behalf, the court alone will not enforce the judgement. The high court enforcement group has the tactics to collect your money for you. They are legally binding and have the basic plans available.
Things to Note:
- Legally you can charge interest on any cost incurred for debt collection.
- A late payment is when the creditor is not able to repay your debt within 60 days
- You will have to notify the debtor that you will start charging interest on the indebted amount in a Letter Before Claim (LBC).