Debt collection involves the recovery of money owed by one person (the debtor) to another (the creditor) The process of recovery as well as the rights and duties of the debtor and creditor are outlined in this article.
- In terms of Zimbabwean law, debt collection is work exclusively reserved for practicing lawyers.
- Debt collection agencies cannot legally represent clients in courts of law.
- Whenever a lawyer receives instructions that involves debt collection, the first thing to be done is to check the validity of the claim.
- Debts that are over three years without having been claimed in our courts are not valid.
- What this means is that a creditor that is owed money should institute debt collection proceedings within three years from the time that debt arose.
- The debt collection process is initiated by a letter of demand.
- The letter of demand should inform the debtor about the sum of money he owes, how the debt was incurred and usually a clear description and explanation of the events or transactions giving rise to the debt.
- The letter of demand should inform the debtor of the interest rate and penalties claimable should payment not be received by the creditor within the stipulated time.
- The main purpose of the letter of demand is to inform the debtor that the creditor has a serious intention to approach the courts and should the matter proceed to court the debtor would be liable for the legal costs incurred.
- A letter of demand allows the debtor the opportunity to settle the debt without court process limiting potential legal costs and interest.
- Parties may agree that the debt be paid in instalments. If this is the case, it is advisable to make the debtor sign a deed of settlement or an acknowledgment of debt to that effect.
- An acknowledgement of debt is a document where a debtor acknowledges his or her indebtedness to the creditor.
- This document is vital in the event the debtor fails to honor the terms of the agreement.
- In the event that the debtor ignores the letter of demand and the period specified in the letter of demand having lapsed, the debtor, through his or her lawyers, issue out summons in the correct forum and then proceed.
- The monetary jurisdiction of the Magistrates Court has recently been increased to USD 50 000 for claims founded on liquid documents and for actions for the delivery or transfer of movable and immovable property and evictions whose value of the property does not exceed USD 100 000.
- The liquid document mentioned above is a document evidencing a clear and unequivocal written promise to pay such as a dishonored cheque or an acknowledgement of debt.
- Upon issuing out summons, the debtor has seven days to respond to the summons by way of an appearance to defend. A failure to respond within the stipulated timelines will result in a default judgement entered against the debtor.
- A creditor may file an application for summary judgement where a debtor defended an action without any recognizable defence to the summons such as where the claim is founded on a liquid document.
- In the event that the application for summary judgement is successful, the matter is concluded, if the application is dismissed, the matter will proceed to pre-trial conference.
- A pre- trail conference is a stage in the proceedings where parties convene a round table and try to resolve the matter or at the very least agree on as many issues as possible.
- The matter will be referred to trial on the remaining unresolved issues.
- Before the commencement of the trial parties will exchange documentary evidence, they intend to use at the trial to avoid surprises and unnecessary delays during the trial.
- During the trial, parties will avail to the court all evidence proving their cases and after all the evidence has been led, the Magistrates will carefully consider the evidence and deliver judgment.
- The unsuccessful party may appeal against the judgment to the High Court. An appeal suspends the operation of the judgement until the appeal is disposed of.
- The successful party may still apply and be granted leave to execute pending appeal.
- The court may order the successful party to pay security for costs to cater for the Respondent’s costs should he succeed on appeal.
- The successful party may enforce the judgment through execution of the debtor’s movable property. In the event that the debtor’s movables are not enough to satisfy the judgment debt, the creditor may proceed to attach the debtor’s fixed assets.