DEBT RECOVERY PROCESS IN NIGERIA
What’s the first step you take when a debtor has refused to pay you the money owed?
a.) Call Police to carry them
b.) Gather boys to beat them to stupor
c.) Call your lawyer.
We want to believe you guessed right, the first thing to do when negotiations have failed is to call your lawyer. This is because the police is not a debt recovery agent (Oceanic Securities Int. Ltd. Vs Balogun & Ors (2012) LPELR-9218 (CA) and self-help will aggravate the matter and may lead to grave legal consequences.
What is a debt?
The court defined a debt in Re: Yakubu (1997) 5 NWLR (pt.506) 549 at 599 as “ money due by agreement or otherwise which can be enforced by law.”
So what steps can be taken?
- Informal Demand and Negotiation
In everyday life, the first thing one would usually resort to is asking for the money, parties can attempt to negotiate the terms of the debt owed and even come up with terms of payment or a payment plan
- Letter of Demand
If negotiations breakdown and the matter remains unresolved, the lawyer may write a letter of demand to the debtor stating the amount owed, the interest accrued, the time frame within which the debt is to be paid and remind the debtor that failure to make the necessary payment may result in further legal actions. This letter of demand should make reference to supporting documents that prove that substantiate the creditor’s claim
- Civil Action
Further failure to pay will necessitate the institution of a civil action against the debtor . The Lawyer may decide to use the Undefended List Procedure or the Summary Judgment Procedure.
- Enforcement
If the court decides the matter in favour of the creditor, the judgment can be enforced in a number of legally approved ways such as garnishing the funds held by third parties for the debtor like banks , obtaining a writ of execution to seize the property of the debtor and put them up for sale by means of public auction.
The Statute of Limitation provides a 6 Year limitation on debt collection excluding the year the contract was entered and executed unless it can be proven that there was a break in the chain of causation such as payment of some part of the sum owed.
These are the legal steps to be taken to recover debts.
Do you agree with us that it works?