Debt Collection in South Africa Explained

Debt Collection refers to the process whereby debt which is due, owing and payable to you is collected by legal means.

Since cash and cash flow is critical to the survival of any business, recovering your debts as soon as possible is an important part of any business. The longer a debt remains outstanding, the less likely it will be recoverable. It is for the aforegoing reason, that debt recovery proceedings should be triggered as soon as possible after a debt becomes outstanding.

The Debt Collection Process

1. Courtesy Call

The first step in the debt collection process and after receiving instructions from you, is that a litigation attorney will contact the debtor to explain that their account has handed over to attorneys for collection and that should they pay immediately, the debtor will not be liable for legal costs, but that should payment not be made, the debtor will be held liable for any legal costs incurred in collecting the debt from them.

2. AOD

Where a debtor is willing to make payment but is unable to pay the debt in one go, we recommend and request that the debtor executes an Acknowledgement of Debt (a.k.a. an “AOD”). An AOD acknowledges the debtor’s indebtedness and records any payment arrangement that has been agreed upon and committed to by the debtor.

If the debtor defaults on an AOD, our litigation attorneys will then proceed with legal action off the back of the AOD and breach thereof.

3. Letter of Demand

If a debtor refuses, neglects or fails to make payment of the debt, a letter of demand will be sent to the debtor.

A letter of demand shows that you mean business and that you are commencing with legal action against the debtor. A letter of demand is necessary in terms of certain provisions of applicable legislation and will set out, inter alia, the amount claimed and how it is calculated.

3. Summons

If a debtor refuses, neglects or fails to make payment of the debt after receiving a letter of demand, then if it is commercially viable a summons will be issued out of a Court of competent jurisdiction against the Debtor.

A sheriff has to serve the summons personally on the debtor. After receiving the summons, a debtor has 10 days to respond on whether they intend to defend the matter. If a debtor refuses, neglects or fails to enter a notice of intention to defend within the prescribed time period, an application for default judgment will be made.

4. Execution

Once judgment has been granted in your favour, we are then able to apply for a writ of execution or warrant of execution so that we can ‘execute’ against the judgment i.e. to recover the debt.

A warrant of execution is executed by the sheriff, who will go to a debtor’s residence or premises and attach the debtor’s movable property (in the first instance).

Section 65 Financial Enquiry

If the movable property is insufficient to cover the debt, a Section 65 financial enquiry will then be proceeded with.

During a section 65 financial enquiry, the debtor is required to appear in Court to give reasons why the debt cannot be paid and the Court can make an order that where the debtor is employed, that the debtor’s employer deduct an amount from the debtor’s salary (emoluments attachment order) and pay it towards his debt.

Garnishee Order

If the debtor has money in a savings or investment account, an application can be made for an order that the bank pays the amount directly over to you.

Sale of Immovable Property

If the above measures do not apply or are not enough to satisfy the debt, an application can be made to sell the debtor’s immovable property.

Our debt recovery attorneys will seamlessly assist you with the time-consuming task of debt collection and recovery. This means that you are free to do the things that can grow your business.

If you need assistance with a litigation matter or dispute, contact our offices today to schedule a consultation with one of our specialist litigation attorneys.