The current financial climate has contributed to significant growth to most creditor's debtor books. Considering same, most credit providers who are unfamiliar with this position have turned to legal firms or debt collectors for assistance in retrieving the funds owed to them.
Often this occurs after the credit provider has made a number of attempts to retrieve the funds themselves. As a result, credit providers are often frustrated when large amounts of time passes by after debtors are handed over for collection.
Considering the above, it is important that credit providers are fully aware of the legal process attributed to debt collection, not only to manage their own expectations but also so that they may ensure that the process has been adequately and timeously attended to.
So what's the process?
Litigation can be costly. It is, therefore important that credit providers consider whether their legal representation will be making attempts to retrieve the monies owed prior to litigation or whether legal processes will be initiated immediately upon handover.
In most instances, legal service providers will be amenable to a ‘soft collection' process prior to proceeding to litigation. In saying that, however, once it is determined that litigation will be pursued, it needs to be determined whether the National Credit Act 34 of 2005, as amended (“NCA”), will apply to the arrangement between the credit provider and debtor.
Should the NCA apply, a letter in terms of Section 129 of the NCA will be sent to the debtor, drawing its notice to the debt and stipulating a time period in which the monies are to be paid.
Should the debtor fail to satisfy its debt within the stipulated period, the next step would be to initiate the litigious process by Summons. The Summons will have to be issued by the appropriated court and then served by sheriff on the debtor.
The debtor will then have to indicate whether it will be opposing the process within the time period stipulated on the Summons. Should the debtor fail to do so, the credit provider will be entitled to approach the court for a default judgment. The request for default judgment will indicate the debtor's ‘default' in respect of the court processes and ask that judgment be granted against the debtor in the absence of its opposition.
Should the debtor oppose the process in time but fail to file its plea (papers indicating the basis for opposition) on time, a default judgment may be sort as well.
Once a default judgment has been granted by the courts, the court may be approached to issue a warrant of execution. This will be served by the sheriff on the debtor. The sheriff will indicate whether the debtor was found, served and whether there was sufficient property at the premises to satisfy the judgment debt.
Should there be sufficient property at the premises, the property will be auctioned to satisfy the judgment debt.
The aforesaid process applies to most debt collection scenarios. However, there are instances where a deviation is necessary and where alternative legal or other mechanisms have to be utilised in order to proceed to the next step in the process.
In order to eradicate frustration and misunderstanding, it is important for the collector and the credit provider to have clear lines of communication regarding what is required to move the process along.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.