Taking Legal Action: Initiating the Process

Recovering outstanding amounts can be done effectively through various debt collection mechanisms.

Drafting and Dispatching a Letter of Demand

Drafting and dispatching a letter of demand is a prerequisite to any debt collection proceeding. This letter sets out the basis of the creditor's claim and creates an opportunity for the matter to be resolved amicably. In some cases, it serves to complete the cause of action before any proceedings can be instituted in court.

Before drafting a letter of demand, it's important to consider whether the National Credit Act 34 of 2005 (NCA) applies. The NCA covers all credit agreements within the Republic, with certain exceptions outlined in section 4 of the Act. If the NCA applies, the creditor must observe sections 129 and 130 to validly pursue any amounts owed.

These sections require the creditor to notify the debtor in writing that the credit agreement will be referred to a debt counsellor, alternative dispute resolution agent, consumer court, or ombud with jurisdiction to resolve the default or negotiate a payment plan. Failure to notify the debtor in the prescribed form may nullify any further action by the creditor.

When to Issue a Summons

If the debtor fails to settle the amount due as set out in the letter of demand, the creditor can proceed with legal action.

Before doing so, consider the Prescription Act 68 of 1969, which states that contractual and delictual debts expire after three years from when they became due, unless secured by a mortgage bond or other security, which might extend the period up to 30 years. Acknowledgment of the debt or partial payment within the three-year period interrupts prescription, keeping the debt valid and enforceable. Prescription can also be interrupted by serving any legal process on the debtor, claiming payment of the debt.

If the creditor fails to institute legal proceedings in time, the right to enforce the claim against the debtor is lost.

Where a Matter Is Undefended

A summons serves to notify the debtor of the creditor’s claim. This must be served at the debtor's nominated or registered address by the Sheriff of the Court. The debtor has 10 court days from service to file a notice of intention to defend.

A matter is deemed "undefended" if the debtor fails to serve a notice of intention to defend or a plea within the prescribed period.

Default Judgment: How and When

Default judgment, binding and swift, is granted without hearing the debtor's version of events if:

• The defendant fails to give notice of an intention to defend.
• The defendant fails to deliver a plea within the prescribed period after a notice of bar.
• The plaintiff does not deliver a declaration or is barred from doing so.
• The plaintiff or defendant fails to appear at trial.

A request for default judgment is generally considered on the papers before the court, clerk, or registrar. If the debtor serves a notice of intention to defend after the creditor applies for default judgment, the litigation proceeds normally.

Where a Matter Is Defended

If the debtor serves a notice of intention to defend within 10 days, the matter is defended. The debtor must then set out the grounds for defense through a plea and counterclaim. This process can be interrupted by a successful application for summary judgment.

Summary Judgment: How and When

Summary judgment provides a speedy resolution without a full trial. In the Magistrates’ Court, application can be made after the debtor's notice of intention to defend; in the High Court, after the debtor's plea and counterclaim. The creditor must show that the debtor has no bona fide defense and is merely delaying the resolution.

Enforcement of Judgment Debt

Obtaining judgment is not the final step. If the debtor does not comply, the judgment can be enforced through the execution of the debtor's property. This involves the attachment and sale of the debtor's property at public auction to settle the judgment debt. Execution requires a court-issued writ or warrant of execution.

Writ or Warrant of Execution

A writ or warrant of execution instructs the Sheriff to attach and sell the debtor's property to satisfy the judgment debt. Challenges include the Sheriff’s inability to access or find sufficient property, insufficient value of attached property, or ownership by a third party.

Section 65A

Section 65A of the Magistrates’ Court Act 32 of 1944 allows for debt recovery after judgment. The court considers the debtor's financial position and determines settlement based on current circumstances. Failure to appear at a section 65 hearing can result in a warrant for the debtor's arrest.

Section 65J

A creditor can obtain an emolument attachment order to attach a portion of the debtor's salary. The employer is ordered to pay a reasonable portion to the creditor until the judgment debt is satisfied. Non-compliance by the employer can result in criminal liability.

Section 66

If other methods fail, the creditor can request the court to sell the debtor's immovable property. This is generally a last resort but can be granted if justified. The court considers the property's value against the debt and exercises judicial oversight, especially if the property is the debtor's primary residence.

Conclusion

Debt collection involves various legal tools, which can be effective if used correctly. However, pursuing debt can be daunting. We at SKM Inc. Attorneys are here to provide reliable and effective debt collection procedures to help you navigate these challenges.