Is your business encountering difficulties and you have unpaid debts to settle? Your creditor can initiate an amicable or judicial recovery procedure against you.
So, how to react to a letter of formal notice or an order for payment? Can we pay a debt in several installments? What If You Can’t Keep Up With Your Debt? Richard Killen Associates will help you to find the answer of all these questions. Let’s move forward and learn more about debt collection.
What is Debt Collection
Debt collection corresponds to the actions taken by a creditor in order to be reimbursed by his debtor. which you can learn more about here Following a contract between a company and its client, this gives rise to the issuance of a trade receivable. This claim is subject to a payment deadline. Once this period has passed, the creditor will then do everything in his power to ensure that the debt is repaid.
- Before starting a debt collection procedure , you must check that the debt includes these three essential elements:
- First of all, the debt must be certain . Proof of the existence of this claim is required. This can, for example, be an invoice or a delivery note for the good or service. However, be careful, you absolutely must have a written record that will serve as proof.
- The second element is that the debt must correspond to a precise sum of money. It is said that the claim must be liquid . It is therefore absolutely necessary that the price be displayed on the invoice issued or on the contract in an exact manner.
- Finally, you can proceed to collection only if the date of payment of the debt which has been defined has passed . This date must absolutely appear on the contract or on the invoice so that you can prove that the payment date has indeed been exceeded.
To use a collection company, you must first check that these three points are respected. If this is not the case, the latter will refuse to take charge of your case.
How is a Debt Collection Procedure Carried Out?
If you can’t pay your bills, you owe a debt to a creditor. This one has at its disposal legal procedures to obtain the payment of this debt: it is what one calls the recovery of debts. The procedure takes place in two stages: amicable recovery and judicial recovery.
Amicable Debt Collection
The recovery of debts amicably seeks the voluntary payment of the debt. To achieve this, the creditor can:
- Proceed with a telephone follow-up , to remind the debtor that he has not paid an invoice;
- Send a follow-up letter , which pursues the same objective;
- Send a letter of formal notice. This is the last step before recovering litigation debts and a necessary prerequisite for other procedures, in particular the order for payment.
Judicial Debt Collection
The recovery of legal claims is to obtain a writ of execution to compel the debtor to pay its debt. It can take several forms:
- The order to pay: it allows payment to be recovered from the debtor
- The interim provision : it enables payment of a provision on the sums due
Assignment in payment to the fund: longer and more complex, this procedure aims to obtain the payment of a debt, most often according to a schedule.
What is the role of the Bailiff in Debt Collection?
The judicial officer intervenes at all stages of recovery, whether amicable or judicial. He can thus:
- Take on the role of conciliator between you and your creditor and take charge of drafting and sending letters in the amicable phase
- Directly issue the writ of execution as part of a simplified recovery procedure. This possibility is offered only if the debt does not exceed $5,000. If you agree to this procedure, then you can attempt a negotiation on the amount of the debt or on a payment in installments;
- Notify an enforceable title: the creditor can go through a judge to obtain payment of his debt. He will even be forced to do so if it exceeds $5,000. If the judge accedes to his request and issues an enforceable title, it will then be up to the judicial officer to recover the sums. Two options: either the debtor makes a voluntary payment, or the bailiff will act by forced recovery, thanks to an execution procedure (seizure, for example).
Note that to avoid conflicts of interest; the judicial officer who issued an enforceable title cannot subsequently be entrusted with the task of forced recovery of the debt.
How to react to receiving a Letter of Formal Notice?
Have you received a letter of formal notice? If it does not come from a bailiff, you can start by checking that it contains the legal information (name of the person responsible for collection, basis and amount of the sum…).
Then you need to check whether or not you can dispute the claim. This must be:
- Certain: the goods must have been delivered or the service performed;
- Liquid: the amount of the debt must be determined
- Due: the payment deadline must be exceeded;
- Not time-barred: the creditor has 5 years to claim payment from you.
If the claim is not disputable and you cannot settle immediately, then you can ask to pay in installments to the bailiff or to your creditor. Be sure to formalize the exchange and the agreement in writing, to avoid any subsequent dispute.
How to react to receiving an Order for Payment?
Upon receipt of an order to pay, you must also carry out the verifications that we have just explained for the formal notice (identity of the sender, conditions of payment of the debt).
The order for payment can come from a judge (normal procedure) or a bailiff (simplified procedure). In both cases, you have a period of one month to make known your opposition to the order for payment, if applicable. You can use an agent, such as a bailiff or a lawyer to defend your interests.
If you agree that the claim is well founded, you will have to settle it. Whether you are under the normal procedure or the simplified procedure, you will have a bailiff as your contact. If you can’t pay off your debt all at once, your best bet is to approach him to negotiate an installment.
Is it possible to Request a Debt Repayment?
In principle, the settlement of an unpaid debt or debt consolidation takes place in one goes. However, if you encounter difficulties and your cash flow does not allow you to do so, you can ask to pay the bailiff in installments. To do this, you will write a registered letter with acknowledgment of receipt, which will mention:
- The difficulties you face;
- The amount you can afford per month;
- The number of months necessary for the payment of the debt and its possible interest, which run from the letter of formal notice.
In reality, the decision does not belong to the bailiff, but to the creditor. If the latter refuses, there are still solutions for staggering payments.
What if the Troubled Business cannot cope with Bad Debts?
If the bailiff has refused the staggering of the debts, you can still have recourse to:
- The professional recovery procedure : if accepted, your debts will be erased;
- A preventive procedure for companies in difficulty: this can be conciliation or an ad hoc mandate. The aim here is to obtain payment terms from the creditor, negotiated by an agent;
- A collective procedure: If your business is in insolvent state, that is to say if its available assets do not resolve current liabilities, then it can be placed in recovery or liquidation. These two procedures have the effect of suspending prosecutions and the freezing of debts arising before their opening.
As you can see, there are many solutions to obtain the payment of a debt in several installments, from a bailiff or through an agent. If you encounter any difficulties, RKillen can put you in touch with a specialized lawyer. This will indicate the best option to follow for the settlement of the debt.