Debt recovery is a legal action to recover debt from individuals, businesses or companies in the event of their refusals or delays in payment of debts. The process of such legal action is devised to ensure that any such action is taken on a timely basis without undue delay. In another word, the faster someone initiates the legal action, the higher the chance of being able to recover their debts.
- Premised on a justifiable debt, the process normally kicks off with NRIC Search / Company Search / Bankruptcy Search / Winding-up Search conducted in respect of the debtors. Such searches will determine whether it is worth pursuing legal action.
- It is normal to start off with a letter of demand but not compulsory. A letter of demand builds up evidence of indebtedness. Instead of going straight to filing a suit in court, it might save both parties time and cost if the debtor and creditor could reach a settlement beforehand.
- Do take note of the time which the event of default started. This has an important bearing on the success of legal action initiated because the time limit to recover a debt is 6 years from the date the cause of action accrued, that is when the debt becomes due and payable.
- Upon commencement of legal action against the debtor, there is the process of law to ensure the debtor’s attention of the action so that they are given a fair chance to inform the court of their side of the defense. However, in case the debtor could not be located or is evading the action, a judgment can be obtained against the debtor in default of their appearance in court.
How long does it take?
In certain straightforward cases with paper evidence or documentary proof, a summary judgment may be applied. The court will determine the claim base on the claimant’s affidavit (or sworn statements) in respect of such paper evidence or documentary proof. In such events, there will be no trial and no examination of witnesses involved. This process usually takes about 1-2 months.
Where the normal process involves trial and examination of witnesses, it will take about 6 months instead.
Upon obtaining the judgment against the debtor, the claimant may apply to the court for enforcement of a judgment against the debtor. The claimant may even apply to the court for the debtor to appear before the court for an examination of the debtor’s financial status. If the debtor refuses to appear before the court, he may be arrested.
Likewise, there is a time limit to enforce a ruling, and that is 12 years from the date of the judgment.
For further details on procedures for enforcement of a judgment, kindly refer to this article: Debt Recovery in Malaysia (II) – Enforcement of Judgment.
About the Author
This article is written by Chia Swee Yik, Partner of this Firm, who has provided advice on legal procedure on debt recovery.
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