What is the Legal Procedure Or Process for Debt Recovery?

March 3, 2023    Civillawyers
What is the Legal Procedure Or Process for Debt Recovery?

Debt collection and debt recovery are the same but have one small but important difference. The difference lies in who is looking to retrieve the debt; debt collection is the attempt of a creditor to recover consumer credit/loans that a customer did not pay back.


Many people are unaware of what is debt recovery; debt is a loan (a credit card balance) that remains unpaid. Read More – loan agreement guide


A creditor looks to hire a third party called a collection service to focus on money collection. Debt recovery is essential as it is related to your credit score. In this guide, you will learn more about debt recovery and the process for a successful debt recovery claim.


What is the process for Debt Recovery without taking legal action?

Debt recovery can be exhausting when a debtor shows no signs of repayment. There are few cases where it becomes vital to take legal action, and if this is something you must do, consider the following:


Steps you must take before taking any sort of legal action –

  • You can talk with the debtor firmly and politely in person with the specific debtor.
  • You can send that individual reminder of his debt at regular intervals. Other than that, you can also inform that individual regarding your plans of taking legal action. It is essential to have a copy of every reminder you send.
  • You can make use of a debt mediation service to avoid spending a lot of time and money on legal proceedings. With the help of this service, you can get expert help from mediators who can help recover your debts.
  • If you see that nothing works, you can send an LBA or letter before action to the debtor. This can be considered as a final warning that there will be legal action. A creditor has to send an LBA before they issue any legal proceedings. The letter must have proper details of the debt, the time to clear it, the consequences of not clearing it and many more.

If you see that there is no response to your LBA, you can choose to take legal action. The initial step you must take is to issue county court proceedings. After you do this, the debtor will likely get a court order that will tell him to clear the debt within two weeks.


Before you know the process of debt recovery, know that they can choose to either clear the entire debt or even make an agreement to pay the debt in instalments.


Ignoring Court Orders

If in case, the debtor does not make a payment or ignores the court order, a CCJ or country court judgement can be issued. A CCJ is a kind of court order that can provide the creditor with the authority to enforce action on the debtor.

Some of the enforcement actions you can take are as follows:

1. HCEO or High Court enforcement officer:

An HCEO happens to be a private employee licensed by the court. You can issue that individual only if the debt exceeds a specific amount. The officer’s work will be incentive-driven as they will be paid only if there are results. They will also have the authority to forcefully enter commercial properties if they have a proper reason to do so.


2. Attachment of earning orders:

This is an order that can inform the debtor’s employer that a part of their salary will be automatically debited either weekly or monthly to pay the debt. This order cannot be utilised if the debtor is self-employed, a pensioner or unemployed.


3. Bailiff company:

You can also get bailiffs to recover your debt. The bailiffs will have the authority to seize the assets of the debtor and auction those assets to pay off the debts.


4. Information order:

It is a type of court order that will summon the debtor to the court for questioning purposes. The debtor can also make payments, and if they cannot satisfy them, the court will take action.


5. Winding-up-proceedings:

A winding-up petition can easily be sent to the court if the debt is above a specific amount. After the court serves, the debtor’s bank account will get frozen. A debtor can choose to clear the debt if they wish to avoid it.


6. Charging order:

There are many people who are unaware of a debt recovery procedure and take legal help. Assets will have changing orders such as land or buildings of the debtor. But it is not a fast procedure as the debt can only be cleared if the debtor re-mortgages or sells the property.


7. Statutory demand:

You can consider it as a formal demand for debts above a specific amount. The debtor will have more than 20 days to make the payment, but if they fail, a bankruptcy petition will be issued to the court. The debtor will also be summoned for a hearing, after which their assets will be liquidated to pay the debts.


Read More – Debt Recovery Lawyer or Agency – Which One to Choose?


What is the legal procedure for debt recovery?

The debt recovery legal process will be unique to every situation, and you can hire top lawyers to advise on the correct steps as part of the first consultation. The typical steps in a Legal debt recovery process are as follows:

1. Initial consultation

This is the step where you can fully understand your present situation. If you hire lawyers, they can advise you on the correct steps to follow.


2. Performing due diligence

This is the stage where Debt Recovery Lawyers review the debtor in detail and want to understand if they have the financial condition to pay back the debt.


3. Issuing a letter of demand

This formal document is created to warn the debtor of possible legal action if the debt is not paid back. This can be a great tool for getting a reaction from the debtor. After this stage, there is negotiation, filing of court papers and many more if debt money is not received.


Associate with Civil Lawyers Perth WA

If you have yet to recover your debt from the debtor and everything you’ve tried has failed, you can take the help of Civil Lawyers Perth, WA. They are one of the top law firms that can provide you with expert lawyers who can help recover your debt in Australia.

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