Debt recovery can be a difficult process. Here are six tips that will aid you in legally recovering your debt.
1. Be aware of laws that may be relevant to debt collection
Although there are no specific laws that regulate debt recovery, other statutes such as the Penal Code and Protection from Harassment Act may apply. For example, threats to use violence should be avoided. You may be charged for criminal intimidation if you threaten to injure the person, his property or even his reputation. You may also incur liability under the Protection from Harassment Act if you have caused harassment, alarm or distress.
2. Be aware of limitation periods
Claims for a debt have a limitation period. If you have made a legally binding IOU, your IOU will also have a limitation period. If the IOU states a repayment date, you must initiate legal proceedings within six years from the stated repayment date. In the absence of a repayment date, the IOU will only be valid to make a claim for six years starting from the date of cause of action.
3. Be open to payment plans depending on the situation
Sometimes, negotiating a revised payment plan with the debtor may help you to recover your debt more smoothly. Instead of insisting on recovering your debt immediately, you can try setting up formal meetings with the aim of negotiating the bargain. Alternative payment plans can be raised and discussed.
A common alteration is restructuring the repayment schedule. For example, a monthly repayment schedule can be modified to become a biannual or annual repayment schedule. Other alterations may also include a longer repayment period with lower monthly instalment amounts, or differing interest rates. Although this may mean that you may not recover the full sum immediately, this is a more realistic option to recover your debt and also helps you to avoid incurring legal costs.
4. Use various forms of communication
Home visits may seem to be the most effective way to recover your debt, but don’t forget that there are other effective ways of reaching the debtor.
Letters are not only useful as a reminder for debt recovery, they can also contain information which may incentivize the debtor to pay. For example, you can include in your letter the option to draw up alternative payment plans. Your letter can also express the desire to meet to negotiate these plans. Letters such as the 30/60/90-day past due notices are also common to encourage the debtor to pay up. Letters, text messages and e-mail correspondence may constitute a paper trail that will aid your case if you decide to initiate legal proceedings.
Personal phone calls are also known to be effective for debt collection as they feel highly personal.
The best method for communication and debt recovery would depend on the situation. If the debtor is a personal relation, you may try communicating with the debtor’s family and friends. If the situation permits, you can even ask the debtor’s family member or friend to guarantee the debt.
5. Engage a debt collection agency
Out of convenience, some people prefer to engage a debt collection agency to recover the debt. This may be beneficial to those who are busy and cannot commit to the time taken to recover debt. Engaging a third party to help you recover your debt may also avoid souring of relations with a family member or friend.
Even then, ensure that the debt collection agency that you have engaged will recover the debt legally. Should they incur legal liability for illegally collecting debt, you may not be able to recover your debt as quickly or conveniently.
The Credit Collection Association of Singapore (CCAS) has developed an industry code of conduct. These are guidelines to ensure that the debt collection process will be done legally. For example, the use of weapons or violence should be avoided. In January 2015, when damage was caused to a stall-owner’s items at Funan DigitaLife Mall in the process of debt collection, the debt collectors were charged with unlawful assembly. Threats to use violence, even where you do not intend to do so, should also be avoided.
Another tip is to ensure that the debt collection agency you have engaged is not impersonating enforcement agencies, e.g. the police. Last year, a local website was taken down for such an offence.
6. Consider your legal options to recover the debt
If you do not want to collect the debt personally or engage a debt collection agency, you may consider your legal options:
- Engaging a lawyer to issue a letter of demand
- Getting a court judgment and subsequently enforcing the collection of debt in court. Recently, the entertainment firm Rits was ordered by the State Courts to pay a debt over $200,000.
- Suing for bankruptcy if there is a personal guarantee in the case of a default of $15,000 or more
For more details on the debt recovery process, read on about debt recovery in Singapore.