Debt Collection Process in South Africa. Know your rights.

An invoice that is more than 90 days overdue has about a 45% chance of being collected in full. Debt Collection can be a very tedious, time-consuming and frustrating process for most people.

The recovery of outstanding debt can be done through the use of various mechanisms. We use a combination of these mechanisms, depending on each case’s unique circumstances. Our general procedure for debt collection is as follows:

Soft Debt Collecting

Soft collections are a term used to describe the collection of bad debt by means other than legal action. This process is implemented before legal action is instituted as a last effort to collect monies due quicker and at a lower cost.

Before the soft collection phase may commence it is often necessary to trace a debtor, The debt collectors offer this additional service of tracing and we ensure that each matter handed over is vetted. The vetting process looks at the feasibility of the handover in focussing on the debtor’s means and credit record.

This is an important tool and may prevent that the client unnecessarily wastes money in pursuing a debt which is not collectable.

Hard Debt Collecting

Hard collection is a term used to describe the collection of amounts owed by means of legal action, therefore by issuing either a summons or liquidation/ sequestration application. This process is implemented after soft collection attempts have failed and there are no prospects of payment being made of the debtor’s own volition.
Once the matter is handed over for hard collection the process is initiated by drafting and issue of the summons in preparation of service thereof on the debtor. The letter of demand is usually sent to the debtor during the soft collection phase in order to expedite the matter.

Step 1 Courtesy Call

After receipt of initial instructions, one of our agents will contact the debtor and explain that they have been formally handed over to The Debt Collectors. We clarify that it is a courtesy call and that, should they pay immediately, they will not be liable for legal costs. However, should they fail to make payment, we will hold them accountable for legal costs.

If the debtor cannot pay the amount in one instalment, we request that they sign an Acknowledgement of Debt. This document sets out exactly when the debtor is to make payment. If the debtor does not make payment in terms of the AOD, we proceed with legal action.

Benefits of an AOD includes:

1. The debtor acknowledges to be indebted and confirms that he does not have any valid defence;
2. The debtor agrees to be liable for legal costs on an attorney-client scale, which is a higher scale as provided for in the Act;
3. The debtor chooses the address on the AOD as his domicilium address. This means that the sheriff can affix the summons to the door of the residence. This is very helpful when the debtor might have moved or refused to open for the sheriff.
4. The debtor agrees to the jurisdiction of the Magistrate’s Court as opposed to the High Court, limiting legal fees;
5. The debtor also renounces the benefits of the legal exceptions such as “excussion”, “division”, “cession of action”, “non causa debiti”, “no value received”, “revision of accounts” and “de duobus vel pluribus reis debendi”.

Step 2 Letter of Demand

Should the debtor fail to make payment as verbally agreed, we send a letter of demand. This sets out the amount claimed and how it is calculated and supplies the debtor with another opportunity to resolve the matter amicably.

In terms of the Act, the creditor is allowed to add interest from the date on which the letter of demand is sent.

Step 3 Summons

If the debtor still fails to pay, we proceed with summons against them. The sheriff will serve the summons on the debtor, whereafter they have 10 days to respond on whether they intend to defend the matter. If the debtor fails to serve a notice of intention to defend within 10 days, an application for default judgment will be made.

Step 4 Execution

There are also numerous mechanisms a creditor has in order to recover the debt once judgment has been given:

1. Warrant of Execution against movable or corporeal property

Upon receipt of judgement, we will issue a warrant of execution against the debtor’s property. The sheriff will go to the debtor’s premises and attach his movable property.

2. Section 65 proceedings

If the movable property is insufficient to cover the debt, we proceed with a Section 65 financial enquiry. The debtor is called to court to give reasons why the debt cannot be paid. The court can make an order that the employer deduct an amount from the debtor’s salary (emoluments attachment order) and pay it towards his debt.

3. Garnishee Order

If the debtor has money in a savings or investment account,  an application can be made whereby the bank is order to pay the amount directly over to the creditor.

4. Application to sell immovable property

If the mechanisms above are still not enough to satisfy the debt, an application can be made to sell the debtor’s immovable property.