How To Recover Bad Debt From Your Debtor In Malaysia
Recovering bad debt is dreadful as it is time-consuming work and tension builds up quite easily. When you have exhausted all other reasonable attempts to recover bad debt, it is advisable that you consider pursuing legal actions to protect your rights and interests.
1. Letter of Demand
A letter of demand is a common method taken to remind your debtor about his responsibility to repay the debt, and to inform him that further legal actions shall commence should he continue to ignore your demands. It is prudent prepare a letter of demand as a first step of debt recovery, as a lawyer’s letter carries weight, and can give your debtor sufficient notice of the possibility of more drastic legal actions against him, so he may face the situation seriously. If he replies, you can enter into negotiations on how he can repay his loan. If otherwise, you may take the matter to court, and your letter of demand can be good evidence to show the existence of the loan, and that you have taken reasonable steps to recover that loan.
2. Small Claims Action
For debts amounting to RM5,000.00 or less, you can opt to file for a small claims action at the Magistrate’s Court. No lawyer representation is needed, which means that you can represent yourself in court. This can help you save on legal costs, and the entire process is rather efficient, as it takes only about 4 months to complete. You should keep any invoices or contracts relevant to the debt as evidence for the court. Again, it is sensible to issue a letter of demand to the debtor before you initiate a small claims action.
3. Summary Judgment
A summary judgment is a fast route for debt recovery. It is applicable for clear cut, straightforward cases, for instance, where the debtor has admitted that he defaulted on the loan and has no defence. Witnesses and trials are not required and instead, the court will decide your case based on the documentary evidence available. Therefore, the process will usually only take up to about 2 to 3 months.
4. Garnishee Proceedings
If you have information about the debtor’s bank that it is currently holding the debtor’s monies, you may apply for a Garnishee Order that allows you to recover the amount due to you directly from the bank. The account would be frozen, and the bank shall then remit the relevant amount from the account to you after a period of 1 to 2 months. During the application, it is useful to provide evidence of previous bank transactions with the debtor to show how you came to know about the debtor’s bank.
5. Charging Order
Similar to a Garnishee Proceeding, a charging order allows you to recover the debt by selling the debtor’s securities, such as shares, bonds and dividends. If the debtor has shares in a company, the order can attach a charge on those shares to prevent any transfer of those shares, and after the lapse of 6 months, you can enforce the order to sell those shares to pay the debt.
6. Writ of Seizure and Sale
Other than intangible assets, you may also consider applying for a Writ of Seizure and Sale against your debtor for his movable properties, such as furniture, kitchen appliances and other valuable items. Upon obtaining the order, the court will command the court Sheriff or Bailiff to seize the property of the debtor to be sold through an auction, the proceeds from which shall then be used to satisfy the judgment debt.
Sometimes a debtor intends to repay his loans but has experienced some difficulties that hindered him from fulfilling his duty to pay. Mediation is always a preferable, more peaceful alternative to court proceedings if the parties are willing to discuss about and agree on different solutions available to solve their dilemma, such as working on a new repayment schedule. A mediator would encourage the parties to engage in negotiations so that both parties can settle things amicably without the need to take matters to court, which can in turn save time and costs.
Our legal system offers various legal routes to help you recover bad debt, and you should always seek proper legal consultation so that you can better understand the available options and determine the best approach for your situation.
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