Debt Recovery Process in South Africa
Debt Recovery Process in South Africa

In South Africa, the debt recovery process for businesses relies on both the sum and the character of the outstanding debts. The National Credit Advisor (NCA) provides information on the National Credit Act (NCA) and the National Credit Regulator (NCR) and has very strict guidelines in terms of how businesses can recover their debts, with specific steps that need to be taken in a specific order. We’re looking at these business debt recovery procedures below:

  1. Letter of demand
    A letter of demand is the first debt recovery step to take. This is a formal letter that requests payment of the outstanding debts within a specified period of time. If the debtor fails to respond, creditors can proceed to the next step in the process.

  2. Summons
    Step two ramps things up a few notches with a summons. This involves sending a formal court document that requires the debtor to appear in court to defend the claim. The summons must be served on the debtor in person or by registered mail.

  3. Default judgment
    If the debtor fails to appear in court or respond to the summons, you move things along to step three. In this step, the creditor can obtain a default judgment which is a court order that requires the debtor to pay the outstanding debt.

  4. Warrant of execution
    The next step in the South African debt recovery procedure is a warrant of execution. If the debtor still fails to pay the debt, the creditor can apply for a warrant of execution. This is a court order that allows the sheriff to seize assets to recover the debt.

  5. Garnishee order
    Step five, involving a financial inquiry to evaluate the debtor’s ability for repayment, can be initiated if the sheriff is unable to attach any assets belonging to the debtor. A garnishee order is a court order that requires a third party, like an employer or bank, to deduct money from the debtor’s salary or account to pay their outstanding debt.

  6. Business rescue
    In some cases, a debtor may be insolvent, and the creditor may have to consider business rescue proceedings. This is a legal process that allows the debtor to restructure their affairs to avoid liquidation.

Get Help with the Debt Collection Process and Get Paid Faster!

Cred-it-data can assist businesses and individuals alike with debt recovery procedures in South Africa. We also know that prevention is better than a cure, which is why it’s so important to know who you’re dealing with to make more confident credit decisions. Contact Cred-it-data today to get help with any of the below:

  • Ensure customers are creditworthy
  • Verify customer details
  • Manage credit limits and payment terms
  • Get access to monthly analytics
  • Monitor changes to customer details
  • Trace customers who owe you money
  • Follow the correct steps to list customers
  • Send the correct legal correspondence

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