What Options Are Available To the Lender for Debt Recovery?

by Andrew Thomas Debt Recovery Rules and Limitations Related

A very common thing in businesses is owing money from other businesses and individuals, and another common thing is outstanding debts and dues. In some odd situations, these dues and debts become tough to recover, leaving business owners with no other option than to seek services related to debt recovery in NSW. This process is called debt recovery and involves collecting outstanding debts to minimise the risk of non-future payment.

A creditor or a lender has various options for recovering debts from a debtor. Understanding them will give a clear idea of the most valuable and result-generating steps for a particular business. You can get more information about them in this article.

Issuing A Letter Of Demand

The first step of the professionals of a debt recovery agency is issuing a ‘letter of demand’ to the debtor. This formal letter includes a request to pay the outstanding debt. It sets out a specific amount held and the period in which the debtor can make the payment. The benefit is that often both parties agree to enter into a debt payment negotiation. If things go well and both parties agree on a specific payment plan, they can carry on the process, and once the entire amount is paid, the case is closed.

Note: This payment plan can be in full or in installments.

Another benefit is that it encourages the creditor and authorises him to take further action if the ‘letter of demand’ is not acknowledged or answered. There is also a downside: the debtor may ignore the letter or raise a dispute against the debt.

Initiate Court Proceeding Regarding The Claim

A very result-oriented step taken by the experts of every debt recovery agency is initiating the claim in court. According to the experts of debt recovery services, you should carefully consider your position and hold on to the case before any legal proceeding. You have to ensure your strong claim because if unsuccessful, the court’s judgement will be against you, and as a result, you might have to pay a portion to the opposite party.

If you choose to initiate court proceedings, you will have to take the following steps with the help of experts in debt recovery in NSW.

• Filing a claim in the court and serving a statement of claim to the debtor regarding setting out the claim

• The debtor will file and serve the defence setting out whether he admits or denies the claim

• If the debtor fails to file a defence, the creditor can apply to the court for a default judgement against the debtor.

• If a debtor makes some claims against the creditor, he must file a cross-claim along with his reply.

• Both parties file and exchange the evidence in the form of affidavits, and from there, the final hearing starts before the court.

The judge or magistrate will hear all the clauses and arguments made by the parties and set out their reasons.

Enforcing Court Judgement

If the claim is successfully passed by the court, the next step of the experts of the debt recovery agency is enforcing the court judgement. This process is lengthy and complex in itself and includes the following steps.

• Plead for the levy of property, where the court orders the local authorities to seize and sell the property belonging to the debtor for debt payment

• The court issues an order to take money from the debtor’s bank accounts and wages for debt payment.

• Examination notice is also served, giving you the right to collect information about the debtor’s income and assets.

• Court declared bankruptcy, and this judgement is awarded for more than $10000, but this is a complex and expensive process.

Before initiating the court proceedings or enforcing the judgement, you must understand that they are often costly and time-consuming. Moreover, in case your claim is not very strong, you might have to bear the losses as well.

Issuing A Statutory Demand

This is a practical step if the company owes a debt of $4000 or more. In this situation, the creditor can issue a formal demand under section 459E of the Corporation Act 2001. This statutory demand –

• Must be in writing and signed by you or someone on your behalf

• Should state the debtor’s company name and address

• Must state the total debt owed

• Must specify a place in Australia to pay the debt, and this is generally the lender’s office address or the address of his solicitor’s office.

An important point to understand here is that the affidavit or court’s judgement should accompany the statutory demand letter. If the debtor fails to pay the debt within the specified time, the company or the individual can be presumed insolvent, allowing the lender to apply in court to wind up the company assets on this basis. The debtor can apply in the court to set aside the statutory demand, but this should come with solid proof that –

• The debtor company or individual has an offsetting claim against the creditor.

• There is a genuine dispute regarding the debt or its nature.

These proofs will give a reason to the court to reduce the debt to below the statutory minimum. The purpose of issuing a statutory demand is not to use it as a debt collection tool, but it can be very effective in debt collection. The downside is that if the debtor moves to the court, the process will become costly and ineffective.