Question

It can be very difficult to come to a conclusion as to how to best recover debt. What factors need to be considered when making a decision? Discuss in 50–80 words.

Answer 1

How a debt can be recovered:

The following are the steps to recover a debt:

• Demand for payment – a demand must be first made to the debtor advising that the debt is outstanding & needs to be paid. It is important that the debtor is given a reasonable time to make the payment. Even if after a reasonable time, there is no response, the debtee can proceed to the next step.
• Obtaining an order for payment – it can be showed that a demand was made for a valid payment. As there was no response, application can be made legally to compel the debtor to make the payment.
• Enforcing the order for payment – an order for examination of debtor’s ability to repay the debts can be made before registrar at the court. The registrar will examine the debtor’s ability for payment & prepare a repayment schedule. If there are no responses to any of these things, then an order for liquidation or bankruptcy can be made.

Factors:

• Time - the debtee has to measure the time that will take for routing the process through courts. If it is a district court, then it can take three months, then if it is high court, it can take around 18 months.
• Money – does the debtor have enough money to repay? If there are insufficient funds for making timely payment, then seeking the recovery of debt can’t be considered as best business decision to be made.