South Africa’s population, in general, has an unfortunate relationship with any type of credit extended, albeit recklessly given or obtained by following ethical credit procedure. With our current economic climate looking gloomy, van der Walt Attorneys paints a picture of what it means to initiate legal debt recovery procedure in the present South African context.
With a steady rise in government debt, our emerging market has one of the highest debt to GDP levels, sitting at a worrying 51.7% as of 2016. We are witnessing a shift in ethical business relationships where individuals are pushing the boundaries of credit extended to them in good faith, whereby even traditional debt collection methods isn’t a deterrent anymore.
Let’s face it, a traditional cold call from an agent demanding payment on the outstanding debt isn’t cutting it anymore. Faced with the harder-hitting reality of legal demands and a sheriff knocking on your door, it seems the legal route is working more successfully.
So what’s the difference between traditional and legal debt recovery procedure one might ask? In its essence, debt collection agents engage with a debtor using multiple alternative tools at their disposal in order to demand the debt be paid back – one of which is an ITC “adverse” report linked to the debtor’s name which reflects negatively on their credit score. To some, this is enough to force them into entering into an agreement on how to pay off the outstanding debt, but there are those who are much more stubborn and just ignore their duty to pay back the monies owed.
This is where the legal route is much more efficient in collecting debt (albeit a more lengthy process). Individuals faced with legal documentation from the start often makes a much more serious impact than a cold call from a persistent debt collection agent. Legal judgments handed down impact the debtor’s credit score severely and sit on their credit record for seven years, even if the debt has been paid back. At van der Walt Attorneys we are seeing a definite shift in clientele moving over their debt recovery process to start with (and end with) a legal firm
Let’s look at the high-level procedure:
First Stage Debtor Engagement
This first interaction with the debtor might be considered the same as a call from a debt collection agent, but one could argue that linking the formal legal letter (or call) emphasising legislative procedure and ramifications within this initial warning, carries much more weight and concern as this is the debtor’s first warning.
Often debtors spring into action and start making arrangements to enter into an acknowledgment of debt – this would be the most favorable outcome if they cannot pay the debt once off. If not, a law firm has the South African law in their box of tools to proceed with legal procedure. In most instances, court judgements are unfavorable for the debtor opening the door for additional actions that can be taken following the judgement to ensure debt owed is paid back in full.
Legal Procedure
It is quite apparent that attorneys can remove the administrative fight and legal battle from their clients and get the debtor to pay using simple legal steps:
(a) Legal Letter before Action – this initial demand letter has a good response rate to already force the debtor to agree to an acknowledgment of debt;
(b) Submit legal case papers to proceed with court action and judgement – Summons issued out of court;
(c) Judgement enforcement using various legal channels – (1) Writ of execution of movable property, (2) Section 65 financial position procedure for payback in installments or (3) Garnishee order.
In conclusion, we believe that going legal from the get-go is ultimately more efficient than traditional debt collectors due to the combination of the administrative and legal procedure we have to offer at van der Walt attorneys. A law firm generally acts with more authority and have the professional legal experience to drive collection of outstanding debt. Don’t all of us want more “bang for our buck”?
Contact van der Walt Attorneys now and let’s solve your rising debtor issues.