Legal Actions and Procedures in Debt Recovery

Debt recovery is a common term used by many businesses but most people don’t know what it entails. Although debt collection and debt recovery almost sound synonymous, they have different definitions. Debt collection includes all the ways taken into consideration to recover a debt. This includes constant reminders, letters requesting payment or a pre-court letter before action. On the other hand, debt recovery comes at a later stage of debt collection. It is the recovery of debts once they are recorded in the account at the end of the fiscal year. The process of debt collection is tedious and sometimes it the cost of debt recovery may surpass the amount of debt itself.

Although a creditor is entitled to recover his/her debt, there are rules and regulations on how to approach the whole process of debt recovery. These rules are upheld by the Commonwealth consumer protection laws and apply to you if you are a debt collector or a creditor who uses an external debt collection agency. Debt collectors include debt collection agencies, debt buy-out service, in-house collection department of business or government agency or a solicitor. The debt collection guidelines for collectors and creditors are produced by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC). These guidelines provide practical guidance on what creditors and collectors should or should not do to minimize their risk of breaching the Commonwealth consumer protection laws.

According to the guidelines, both the debtor and the creditor have responsibilities when it comes to debt recovery. Debtors are legally responsible for paying the debts they owe. A debtor should not try to avoid the obligation to satisfy the debt they have incurred. When a debtor is experiencing financial difficulties it is their responsibility to promptly contact creditors and debt collectors and negotiate a variation in payments or other arrangements. Moreover, the debtor has to be candid about their financial position including other debts. The ACCC and ASIC also recommend that debtors experiencing financial difficulties should seek the assistance of a financial counsellor, solicitor or other qualified advisers who may be able to assist them with debt negotiation. Moreover, the rights of debtors are also prescribed in the guidelines.

Debts can be either be recovered through the courts or by using creditor or collection agency personnel to negotiate repayments. Debt recovery through the courts is regulated by territory and state law and the procedural rules of the courts. The recovery process may include repossession of assets, securities and other legal enforcement of security interests. As a creditor, you have the right to take legal action to recover a debt. Moreover, you can conduct legal repossession activities and other legal enforcement of legitimate security interests. One can also seek and obtain pre-judgment remedies, enforce the judgement through a court process and undertake all necessary procedures associated with these actions.

The actions of both the debtor and creditor must be in line with stipulated guidelines to ensure no party breaches the Commonwealth consumer protection laws. When it comes to making contact with the debtor there are rules and regulations to be followed. One is obligated to protect the privacy of a debtor and ensure that person they are dealing with is the debtor. Collectors and creditors should not misrepresent their identity in any way and should only contact the debtor for a reasonable purpose only. There are also rules and regulation on the allowed hours of contact, place of contact, and frequency of contact.

Clearly, debt recovery has a lot of legal implications. By following all the guidelines governing debt collection and recovery, one can avoid legal consequences that may prove to be dire. More often than not the process of debt recovery has numerous parties involved including, the creditor, the debtor, a debtor representative or a debt collector. The interaction between these parties must be within the legal framework of debt recovery. This legal framework is only put in place to ensure the creditor recovers his/her debt while the debt is protected from exploitation. Debt collection agencies and solicitors follow these laws to ensure seamless debt recovery.