FAQs about Debt Recovery and Collection in Malaysia
Debt collection can be a very challenging task, especially if the debtor is not cooperating. If you have tried all other methods of debt collection and the debtor still refuses to pay, you may need to consider taking legal action.
However, before you do so, it is important to understand the process of debt collection through the courts in Malaysia. This FAQ will provide you with an overview of the process, including what documents you need, what happens after you hire a lawyer and, how to execute the judgment against the debtor in Malaysia.
1. What is the limitation period for debt recovery in Malaysia?
The limitation period for debt recovery in Malaysia is 6 years from the date on which the debt becomes due. This means that a creditor can only take legal action against a debtor to recover a debt if the debt is less than 6 years old. If the debt is more than 6 years old, the creditor will have no legal recourse.
2. Do I need to send a letter of demand before taking legal action against a debtor?
No, you do not need to send a letter of demand before taking legal action against a debtor. However, it is generally a good idea to do so, as it can help to strengthen your case. A letter of demand is a formal document that outlines the debt and demands payment from the debtor. It can also serve as a warning to the debtor that legal action will be taken if they do not pay the debt.
3. What happens if I take legal action against a debtor after the limitation period has expired?
If you take legal action against a debtor after the limitation period has expired, your case will be dismissed by the court. This is because the court will not have jurisdiction to hear the case, as the debt is no longer legally enforceable.
4. What are the different methods of debt recovery in Malaysia?
There are a number of different methods of debt recovery in Malaysia, including:
- Letters of demand: As mentioned above, letters of demand are a good way to start the debt recovery process. They can help to strengthen your case and may even prompt the debtor to pay the debt. This is usually effective where the debtor will be more responsive once a legal notice is served.
- Mediation: Mediation is a process where a neutral third party helps the creditor and debtor reach an agreement on how to resolve the debt. This can be a less expensive and more amicable way to recover a debt than going to court.
- Court action: If all other methods of debt recovery have failed, you may need to take legal action against the debtor and it may be the only way to recover the debt.
5. What documents do I need to bring to my consultation with a lawyer?
You should bring all of the documentation related to your debt, including:
- The original agreement or documentation that evidences the debt.
- Any correspondence you have had with the debtor, such as letters of demand.
- Any evidence of the debtor’s ability to pay, such as payslips or bank statements.
6. How do I execute the judgment against the debtor?
Once you have a judgment against the debtor, your lawyer can take steps to enforce the judgment to compel the debtor to pay.
7. What if the debtor has no money to pay?
If the debtor has no money to pay, you may still be able to recover your debt through legal action. Here are a few options that you may have:
- Garnish the debtor’s wages: If the debtor is employed, you may be able to garnish their wages. This means that a portion of their paycheck will be taken directly by the court and paid to you until the debt is satisfied.
- Seize the debtor’s assets: If the debtor has any assets, such as a car or a house, you may be able to seize them and sell them to pay off the debt through court process.
- Sue for bankruptcy: This may be the last resort and ultimately it depends if you are a secured or unsecured creditor in order to claim your debt legally.
8. What are the responsibilities of creditors in Malaysia?
Creditors have the responsibility to provide accurate information to prove the debt. Creditors are also prohibited from engaging in unfair and illegal debt collection practices.
Debt collection through the courts can be a long and expensive process, but it is sometimes the only way to recover your money. If you are considering taking legal action against a debtor, it is important to speak to a debt recovery lawyer to get advice on your specific case. A debt recovery lawyer can help you to assess your chances of success and to ensure that you follow the correct legal procedures.
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