5 Common Questions on Debt Recovery

1. What are the steps to recover my debt?

First, it is advisable that you send a Letter of Demand (“LOD”) to the debtor. It is a letter which formally demands the debtor to pay the amount of money which is owed, and also put the debtor on notice that legal action may be taken against them.

 

Although it is not a legal requirement to issue a LOD, a LOD may be used to establish your claims, and as evidence in court, as proof of your attempt to settle the matter. We have seen cases where debts being paid upon receipt of a LOD, with no further action being required.

 

You may issue this letter yourself, or engage a lawyer to draft one for you. However, it is always advisable that you engage a lawyer to prepare the LOD, as your lawyer may be able to give you more comprehensive advice, and having a LOD issued on a law firm’s letterhead project a strong intention that one is serious about taking action to recover those debts.

 

2. What is the Court process in debt recovery?

The most common way is to start your claim by filing a Writ, and Statement of Claim (“SOC”). You may appoint a lawyer to assist you in preparing the necessary cause papers.

 

The debtor has 14 days to file a defence after he/she receives the SOC. After the debtor files a defence, you may apply for a Summary Judgment. By applying for a Summary Judgment, the case will not go for a full trial, where witnesses will be called and examined. The Court will decide the case based on the documentary evidence filed by the parties.

 

A summary judgment application generally takes 6 months, from the filing of the application to a Court judgment.

 

3. What if the debtor does not defend my claim?

If the debtor fails to file a defence, you may proceed to obtain a Judgment in Default against the debtor. This means that the Court will make a Judgement in your favour, and it will be binding upon the debtor, unless and until he/she sets aside the Judgment.

 

4. What happens if my debtor is unable to pay the debts?

If your debtor is a company and it is unable to pay your debts, you may file a winding-up petition against the company. Winding-up is the process of bringing the life of a company to an end. After the company is wound up, the company’s assets will be collected and realised to satisfy any debts and liabilities.

 

Before commencing winding-up proceedings, you must serve a notice to the company to demand for an indebted amount more than RM10,000. If the company fails to comply with the demand within 21 days from receiving the notice, then you may file a petition in Court to wind-up the Company. It is advisable that you engage a lawyer to assist you in the process and help you to prepare the necessary documents.

 

5. What can I do if I obtain a Court Judgment against my debtors, but they still refuse to pay?

Upon pronouncement of Judgment, there are several ways that you can enforce it against the debtor, including:

 

  • Judgment Debtor Summons (“JDS”) – where you force the debtors to the Court to disclose their financial status, assets, income and expenses;
  • Garnishee Proceedings – where you receive money from a third party, for example, the debtor’s bank, or the debtor’s employer for his monthly salary;
  • Writ of Seizure and Sale – where the Court orders a seizure of the properties owed by the debtor, and then sell those properties to repay your debt; 
  • Charging Order – this order is directed against securities to which the debtor is beneficially entitled, including shares, debentures and debenture stock.

Which execution proceeding is the most suitable will depend on the facts and circumstances of your case. Further, there are certain procedures that need to be complied with in each type of proceedings. Hence, you may need to engage a lawyer to walk you through this process.

 

 

Disclaimer: This article is written by ZY Ho. It is intended for general informational and education purposes only and not for the purpose of providing legal and professional advice. Have a question on debt recovery? Contact members of Chern & Co. at info@chernco.com.my

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