What is a debt?

A debt occurs when one party owes another money and payment becomes overdue. Whether this is money owed for a personal loan or to a company. In such circumstances, the person or entity that owes the money is referred to as the “debtor” and the person or entity that is owed the money is referred to as the “creditor.” When a debt is owed, the creditors can try and claim their money back. There is no standard process for debt collection, it is dependent on the circumstances and the terms of the credit contract or agreement. Common processes include:

Debt collection agencies

A creditor may employ an outside agency to recover the debt. A debt collector will contact the debtor in regard to the debt and attempt to negotiate an agreement or repayment plan. If the debtor does not co-operate or defaults on a repayment, then the matter may be referred for legal action. This can result in the debtor being liable for further costs.

Repossession

Repossession is where the creditor may take back a product to cover the overdue debt. Usually, this item is the item you bought with the credit. For example, a car. It may also be another item, although it must be one listed in the credit contract.

Legal action

It is important to repay any debt owed because the creditor may take legal action, which can include court proceedings. Legal action can be taken against a debtor to recover a debt in the following jurisdictions

The Disputes Tribunal: if the debt is $30,000 or less, but only if the debtor disputes the debt owed.. It is important to note that you can not be represented by a lawyer in the Disputes Tribunal.
The District Court: if the debt less than $350,000.00 then the matter can be dealt with in the District Court.
The High Court: The High Court can hear claims for a debt of any amount. However, this jurisdiction is generally only used for more serious proceedings such as bankruptcy or liquidation proceedings because of the higher costs.

If the matter is dealt with in the District Court or High Court, then the creditor can also claim costs from the debtor. Whether they can claim full costs or Court scale costs(under the District Court Rules (2014) is dependent on whether there was a contract and what the terms of the contract provide for.

Once a court judgment is obtained, it may be enforced by the creditor following a 28 day period if payment is not received or a satisfactory repayment plan has not been agreed. Common enforcement options include a warrant to seize property, an attachment order to the debtors wages and a charging order over a debtors house. A Financial Assessment Hearing is often the first step in enforcement to evaluate the a debtor’s financial circumstances and assess their ability to repay the debt owed, including income, outgoings and assets.

Can I dispute a claim that I owe debt?

If the creditor takes legal action in the Courts (not the Disputes Tribunal) and the debtor wants to dispute the creditors claim, they have 25 working days following being served with the claim to file a statement of defence. During the 25 day period, the creditor will cease any further action. In order to dispute a debt, the debtor will need to provide substantive evidence as to why they do not owe the debt. For example, proof of payment or evidence that the services contracted for were not provided.. Whatever the reason, evidence is key to support the defence. If the debtor does not file a defence or enter into a satisfactory repayment plan with the creditor, then the creditor is able to file for a Judgment by default.

Limitations of debt:

The Limitation Act 2010 outlines that a creditor has six years to recover a debt. The limitation period begins as soon as the debt is owed. This applies unless the entire debt or part of the debt is acknowledged as owing by the debtor at a date later than the limitation period. If the debtor acknowledges the debt, then collection may still be legally pursued

The general limitation period is also subject for expansion in the instance that the debt is acknowledged in a deed. Whereby, section 9 of the Property Law Act 2007 outlines requirements to make the time limit twelve years.

What we do:

Godfreys Law are able to help with all debt recovery action including drafting a Disputes Tribunal claim, sending a letter of demand for payment, commencing general proceedings, filing a petition for bankruptcy and in the case where a business is the debtor, commencing liquidation proceedings, including enforcement of any Judgment.

A letter of demand for payment is a useful tool in debt collection. This gives the debtor a final chance to make payment or enter into a satisfactory repayment agreement before the matter proceeds to Court and further costs are incurred.

If you are unsure about whether a debt is recoverable or require more information on the debt collection processes, get in contact with Godfreys Law.