A wise man once said ‘’Running into debt isn’t so bad. It’s running into creditors that hurts.” Of a truth, incurring debt sometimes is inevitable and very necessary for business to survive or expand, but issues usually arise when the debt becomes due for payment and the debtor is not forthcoming with the money. This unfortunate situation plays out every now and then, and has left many businesses on the brink of extinction.
This has forced many creditors to resort to several unconventional and illegal means of recovering debt. While some have resorted to self-help like the use of violence, intimidation and threat against debtors, others have deployed the police to recover their money. The former is a prevalent practice deployed by many creditors.
This practice has however been condemned severally by the courts who have declared such practice to be illegal as debt recovery doesn’t fall within the purview of police duties, being strictly a contractual matter. It has been said that the police is neither a mediator nor an arbitrator; so the practice is in the face of the law illegal. The only exception to this is where the debt was incurred by a crime like advanced fee fraud, obtaining money by false pretense or the use of dud cheques and other similar crimes.
So, if self-help and deploying the police is not advisable, what can the creditor do to get back his money? Fortunately, there are several legal means of recovering debt available to the creditor. I will be sharing some.
First, if the agreement is in writing, I would advise you check the agreement to see if there is any clause that provides for a procedure to take if the debtor defaults. Usually such agreement would contain a clause to that effect but where this is not the case, you can explore the means of negotiation by speaking to the conscience of the debtor. If this is done properly both parties may reach a compromise. The creditor may concede to collecting his money in installments or at intervals to be agreed by the parties.
However, if negotiation fails, the creditor may consider writing a letter of demand to the debtor. A letter of demand is a letter written by a creditor to the debtor demanding the payment of the money due to him within a particular time frame and informing him of his intention to commence legal action against him if he fails to pay within the particular time frame. What a letter of demand does, is that, it shows your seriousness about recovering your money and more importantly, it lays a good foundation for a potential court case should the matter eventually go to court. In the event that the debtor fails to pay within the time stipulated in the demand letter, it will serve as proof that the creditor had taken reasonable steps to recover the money due to him. It is important to note that a cause of action for recovery of debt cannot arise except where the creditor has made a demand for the sum due to him. This is usually evidenced by a letter of demand.
Where the debtor is a company, you could write a statutory letter of demand to the company where they fail to pay it serves as good ground to bring a petition for the winding up of such company. The demand should be formally titled as “STATUTORY LETTER OF DEMAND PURSUANT TO SECTION 409 OF COMPANIES AND ALLIED MATTERS ACT”. It should set out the debts owed, a request to pay within three weeks and a notice that upon expiration, the creditor would take steps to wind up the company.
Should the debtor remain recalcitrant after exhausting the option of a letter of demand, you can consult your lawyer to institute an action for the recovery of the debt. He will likely commence an action for summary judgment especially where it is certain that the debtor has no defense to the case.
In conclusion, the law is very clear on the procedure for recovery of debt. Creditors hence should desist from the use of self-help as it may give rise to an action to enforce the debtor’s fundamental human right against the creditor and damages might be awarded against the creditor to compensate the debtor for injury suffered as a result of the use of self-help.