Debt Recovery from a Debtor's point of view - Part 1


Author(s):Maria Abertos B. A., LL.B.
Publish Date: June 29, 2008

What are the time limitations?

Legal action to recover a debt can be commenced at any time within six years from when the debt becomes "due and payable" in full. For some debts the six years starts from the time the debt is incurred and for other debts the six years starts at a later time so make sure you check with a lawyer before refusing to pay an old debt. If you have "confirmed" the debt, either by admitting that you owe the money or making a payment, the time limit starts from the date of the confirmation. So, for example, every time you make a payment on a loan you are starting the six year limitation period again. If you have a debt which is "out of time", you should seek legal advice about whether or not you still have to pay the money back.

What happens when I can't pay?

If you have to pay off a debt but you can’t afford to, it is sometimes best to try to negotiate with the creditor. You might be able to agree on a method of payment that is easier for you. There are a number of different methods of payment that you might be able to suggest as an alternative to paying the full amount in a lump sum. You should be sure of what the alternatives involve and avoid those that you cannot fulfil. You can get help to negotiate and to understand your alternatives.

Payment By Instalments

If you can pay small amounts of the debt at regular periods, you might be able to pay by instalments. If you cannot pay the instalments you agree to pay, the debt recovery process will continue.

Postponement Of Payments

If the inability to pay is temporary, you may ask for a ‘moratorium’ for a period. This means that you would not have to pay anything during the period of the moratorium but you will still have to pay when the period is finished.

A Reduced Lump

If you are unlikely to ever have enough money to pay the full amount you owe, you might be able to offer to pay less than the full amount in a lump sum. Some creditors prefer to accept this smaller amount than wait a long time for their money or not get anything at all.

Waiver Of The Debt

If you are suffering a severe hardship and will never be able to pay off any of the debt, you might be able to negotiate to have it waived. This means that the creditor agrees not to pursue you for the debt. You will have to prove that you have a good reason why you will never be able to pay, such as having no money or assets and no chance of that ever changing. Note that having a debt "written off" does not necessarily mean that your legal obligation has gone. Where possible, it is better to prepare a Deed of Settlement extinguishing the debt. An executed Deed does finalise your legal obligation but a creditor is unlikely to agree to sign one unless there is some benefit to him/her/it such as the payment of a sum of money.

What happens if I receive a Statement of Liquidated Claim?

A Statement of Liquidated Claim is an official court document prepared by someone who thinks they are owed some money. They must then give a copy of the Statement of Liquidated Claim to the person who they say owes them the money. This is called service.

If you receive a Statement of Liquidated Claim you must act quickly if you want to defend the claim. You only have 28 days to submit a defence or you risk having default judgement made against you. This means that the case will be heard in Court in your absence and the Court can order that you owe the money that the other person is claiming. You should never ignore a Statement of Liquidated Claim and should always make sure you get legal advice straight away.

Can I Be 'Served' Without Even Knowing About It?

Yes, the person wanting to serve the document has to try their best to get the document to you, but if they cannot, they can apply to the court for 'substituted service'. This means they might be allowed to try to bring the document to your attention in some other way. For example, they might be allowed to deliver it to someone who you have regular contact with, such as other family members. However, if a default judgement is made and you did not receive a Statement of Claim, you should make sure you find out whether there was one really served.

What Are My Options Now That I Have Been Served?

There are several ways your legal adviser will respond to the claim on your behalf:

  1. Defend the claim, if you think you do not owe the money;
  2. Make your own claim against the creditor (if you believe he/she/it also owes you money);
  3. Confess to the claim, if you agree you owe the money;
  4. Partially confess and partially defend, if you believe you owe some of the money;
  5. Negotiate informally with the creditor (this can be done simultaneously to 1,2,3 or 4 above);
  6. Do nothing, if these are your instructions however this is not a recommended strategy.

How Do I Defend The Claim?

Your legal adviser will enter a defence on your behalf by filing a "Notice of Grounds of Defence stating the reasons why you do not owe the money. Your adviser will arrange for a copy of your defence to be served on the Plaintiff.

What Happens If I Don't Defend The Claim?

You will most likely have default judgement made against you. Most of the time you will then have to pay the money that the court has ordered you to pay. The money can be claimed from you anytime within 12 years of the date of the judgement. It is very difficult to avoid a default judgement. It is possible to apply to the court to have it set aside, but if there is no good reason why you did not submit a defence when you had the chance, you might have more costs to pay as well as the amount of the judgement. If you defend the claim but you are still ordered to pay the money, you can apply to pay by instalments but will have to show the Court why you are unable to pay in full. The Magistrate can make this order even if the plaintiff does not agree.

 

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