Lecture Fundamentals of business law (4th): Chapter 16 - Margaret L. Barron, Richard J.A. Fletcher

Chapter 16 - Debt recovery. At the end of this chapter you should understand: the steps that should be taken before deciding to grant credit to an applicant, the steps used to encourage punctual payment of debts, the steps in the debt collection process, the matters that should be considered before commencing legal proceedings,...

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Debt recovery

Chapter 16

• Debtors: Those people who owe

money to others.

• Creditors: Those people who are

owed money.

Creditworthiness check

• Proof of identity of applicant

- Name

- Address

- Assets and liabilities

- Employment status

If company: - Name of Directors

- Address of Directors

- Paid-up capital of company

• Credit references

Credit policy

• Credit policy should be notified to

debtor.

e.g When payment is due

 Acceptable methods of payment  Interest charges for late

payments

Punctual payment

Incentives to encourage punctual

payment of debts:

• Discount for early payment

• Credit charge for late payment

• Notification of overdue accounts

- account rendered sent

- personal phone call

Debt collection process

ACCOUNT RENDERED

(for unpaid account)

LETTER OF DEMAND Details of debt Date debt incurred Debt Collection Specify date payment to be made Agency

Specify legal proceedings will result

PAYMENT Negotiation or LEGAL

MADE Mediation or PROCEEDINGS Arbitration

COURT ISSUES SUMMONS AFFIDAVIT OF SERVICE OF Particulars of claim:

SERVICE SUMMONS Names - plaintiff and defendant

Proof of service Given to Addresses - plaintiff and defendant

of Summons Defendant Details plaintiff’s claim

Defendant - possible

responses

Service of Summons

Agrees to Pay Agrees to Pay Through

in Lump Sum in instalments Court

Dispute Claim via Judgement Against Filing Defence Defendant

(Judgement in Default) For Defendant For Plaintiff Judgement

Finish Plaintiff - Judgement Creditor

Enforcement of the

judgement

ENFORCE THE JUDGEMENT

EXAMINATION SUMMONS/ORAL EXAMINATION

Ability of debtor to pay is examined

Payment by Seizing goods of debtor and Debt > $2000

instalment selling to satisfy amount owing

Paid on behalf of debtor AGAINST LAND

(ATTACHMENT OF debtor at public auction

Unacceptable behaviour when collecting debts

Consumer Credit Code

• Prevents debt collector from entering residential property to repossess goods.

State Trading Acts

• Prohibits the use of physical force or undue

harassment or coercion.

Trade Practices Act 1974 (Cwlth)

• Prohibits the use of physical force or undue