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Three Steps to Debt Recovery

During the pandemic, many business owners are worried about how to recover debts from their debtors. Hence, today we would like to share some useful information regarding the steps to be taken before initiating debt recovery action:

 

FIRST,IDENTIFY THE LEGAL ENTITY OF THE TRANSACTION PARTIES

 

Before initiating debt recovery action, a creditor first needs to identify whether the other party who entering the transaction is a sole proprietor, partnership or a company.

 

This is because many people don’t know that the liabilities of a company and shareholders are separated, and in a normal partnership business, partners would share their debts/ legal liabilities. In some complicated cases, there are individuals who impersonate/ misrepresent to be other companies.

 

Therefore, it is very important to identify the legal entity of the transaction party. This will enable lawyer to consult the creditor correctively, and also determine the suitable method for recovering the debt based on the legal identity of the other party.

 

SECONDLY, PREPARING/ COLLECTING THE RELEVANT DOCUMENTS THAT CAN PROVE THE TRANSACTION BETWEEN THE PARTIES

i.     Document which can show that the creditor has fulfilled his obligations.

 

ii.     Documents which can show that the debtor failed to fulfilled his obligations.

 

iii.    In consequence thereof, the document which can show that the creditor has suffered a monetary loss

 

Examples:

 

(1) Normally for sale and purchase of goods, purchase orders, delivery orders and invoices are the documents that can be used as evidence to prove that the other party has failed to fulfil his obligation. The documents can also be used to prove the losses suffered by the creditors.

 

(2) If the two parties have signed an agreement, this document can directly be used as evidence to prove the contractual relationship/transaction between the parties. In addition, it will be useful for lawyer to analyse the case for creditor and advise him in advance whether it is worth to litigate the matter in the court.

 

(3) A more challenging situation is where two parties have entered into the transaction through an oral agreement, this will certainly cause the entire debt recovery process to be full of uncertainty, because the creditor would face a higher legal burden (of proof) in the debt recovery action.

 

THIRDLY, IDENTIFY WHEN THE LIMITATION PERIOD SET IN

 

According to Malaysian law, if the debt is incurred due to breach of contract/agreement, the statutory period to start the litigation process is six (6) years, starting from the day when the other party breaching the contract/ agreement.

 

If a creditor delays in starting the debt recovery action, not only he would face the risk that his lawsuit being barred judicially due to the limitation set in, he may also encounter a situation where he is not able recover the debt (even he wins the lawsuit) due to the debtor or the company may already gone insolvent at that time and thus unable to pay the debt.

 

Hence, before getting a lawyer, a creditor should always take note of the date of the breach of contract before it is too late.

 

These are some information regarding divorce that we want to share with you today. If you have any inquiries, please do contact us: https://wa.link/q3kmv5

 

A.    If you want to know about the answers to some frequently ask questions in a debt recovery action, you can read our article

 

B.     About any exception to the law of limitation, you can read our article

 

C.     Whether friendly loan agreement is valid in law, you can read our article

 

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