What is a debt collector?
A Debt Collector can be a person or agency, usually a law firm or a mercantile agency, that collects debt in behalf of a person or business, a creditor, that owed money by one a debtor.
Debt Collectors are usually engaged once a business has exhausted attempts to obtain recovery directly from the debtor. Debt Collectors have access to a wind range of actions and procedures to seek recovery of outstanding debts. Below are some of the actions that a debt collector can take if you don’t pay a debt:
1. Contact you by mail, email or telephone:
The first step most Debt Collectors will take is to contact you to seek payment of the debt. This is generally done by way of a letter of demand, which can either be sent by mail or email (or both). Debt Collectors can also reach out to you by telephone, particularly where you have not responded to the initial letter or mail has been returned. If you are particularly difficult to contact, Debt Collectors can also contact your relatives or associates or attend your property in an attempt to contact you.
2. Commence legal proceedings and enter judgment against you:
If a Debt Collector is unable to obtain payment of the debt by way of the letter of demand or other contacts, they can commence proceedings in the Court to recover the debt, plus the debt collector’s costs and interest on the debt, by filing a document called a ‘Statement of Claim‘. Once Court proceedings are commenced the debt collector will arrange for the Statement of Claim to be served on you and you will have 28 days to either pay the amount claimed or file a defence. If you do not do either, the Debt Collector can arrange for the Court to enter judgment against you, which is a Court order that the debt is due and payable.
3. Affect your Credit Rating:
If a Debt Collector obtains a Court judgment against you or your business, the judgment will be recorded by Credit Reporting Agencies as a default on your credit report, which, among other things, may affect your ability to take out a loan or obtain a credit card until the default is removed. In order to remove the default, you will either need to contact the debt collector to seek their agreement to remove the default (usually through payment of the debt) or seek your own legal advice in respect of removing the default.
4. Send the sheriff to your house or business premises to seize your property:
If a Debt Collector obtains a Court judgment against you or your company, they can apply to the Court to issue a writ against you. This will result in the Court sheriff attending your house or business premises and seizing and selling your assets to satisfy the creditor’s judgment debt.
5. Issue a garnishee order on your bank, employer or tenant:
If a Debt Collector obtains a Court judgment against you or your business, they can apply to the Court to issue a garnishee order against your bank, which will mean that the bank will have to pay money held in your bank account/s to your creditor without notice to you. Garnishee orders can also be issued against your employer or tenant in which case they will have to pay wages or rent directly to the creditor.
6.Commence proceedings to wind up your company or bankrupt you:
For debts over a certain amount, a Debt Collector can commence proceedings to wind up your company or bankrupt you. This will result in the appointment of an independent insolvency accountant (known as a liquidator for companies and a trustee for bankrupts) who will, among other things, seize and sell all of your company’s or your assets and distribute to proceeds to your creditors.