Legal & Compliance Service

Legal & Compliance

Taking legal action to reclaim debt should be a last resort, and often the threat is enough to make your customers pay you. However, if your usual ways of recovering debt have failed, there are things to consider before beginning the legal process. The court generally offers three processes for settling disputes depending on the amount of money involved. The small claims process - part of the civil court system - is an inexpensive and straightforward way of settling disputes over smaller amounts. Claims over Rs. 200,000 should go through either the fast track process (up to Rs. 500,000) or the multi-track process (above Rs. 1,000,000). However, a High Court judge may also refer cases involving larger sums to the small claims process - or you can request this with your debtor's agreement.

Serving Both Consumer & Commercial Lenders

• Choosing the right legal route -

  If you decide to issue a claim, the amount of your claim will determine which court may handle it - the civil court, or the High Court. The civil court is where most claims are issued and you should go to this first to make a claim. Civil courts deal with a range of claims, including debt recovery. Larger and more complex claims will normally be heard in the High Court.

• Using solicitors and debt recovery agents -

  If your case is straightforward, you could prepare the claim, present the case and handle the enforcement on your own. Most people choose not to use solicitors in the small claims track. But there may be times when you decide you want to seek advice from a solicitor. You should note that: Legal aid is not usually available for small claims cases. Legal costs aren't normally recoverable If your claim is for a large amount, is likely to be disputed or the case is complicated, or even if you're simply not comfortable handling it on your own, it is probably sensible to get professional help. This will usually be a solicitor or debt recovery agent

• A warrant of execution-

  This allows court bailiffs to take goods from your debtor's home or business, although there are safeguards in place and certain goods cannot be taken. After a holding period the goods or assets will be sold at auction. Fees and expenses will be taken from the proceeds and you will be given the remainder.

• The threat and how it works-

  Often the mere threat of winding up or bankruptcy is very effective. But if the customer still refuses to pay you might consider the following steps: A statutory demand, from a legal stationer or solicitor, must be delivered to the customer, preferably by hand. On receipt, the customer has a fixed number of days to pay or respond. If they do not do so, you can issue a winding up petition or bankruptcy petition. If you are right and follow all procedures correctly, the customer will be wound up or made bankrupt. But just because you issue the petition does not mean you get priority over whatever money becomes available. You should seek legal advice before you act, and you should only act if the money is definitely owing. You have to pay fees to bring an action and the court will add these to the amount owed. However, this is no guarantee you'll be reimbursed. As a last resort, if the amount you're owed is more than Rs. 200,000, you can apply to make an individual debtor bankrupt, or issue insolvency proceedings if the debtor is a limited company. Such proceedings can be costly.

• Appointing a liquidator or trustee-

  Where a company is put into liquidation or a person is made bankrupt, you may have to appoint a licensed liquidator or trustee in bankruptcy. Insolvency practitioners charge fees to the money recovered and you may have to guarantee these fees if the money recovered is not enough.