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Debt Recovery Protocol – Know How to Deal with Debtors

Debt Recovery Protocol

You may have lent money or sold a service or product to people as a part of your business. In these cases, the law grants you the right to demand repayment. Moreover, you can undertake various measures to recover what you lent, along with interest. But, there are some limitations on what exactly you can do after all. The government has set a debt recovery protocol which is mandatory for you to follow as a creditor. In case you are new to this, keep reading for all the details regarding the protocol that you need to follow and know on this matter. 

What does the protocol include?

When you give money on credit, you’ll take various steps to recover it. Some legal methods are available to you. However, you cannot go for them right away. In other words, you can’t take the individual who owes money to court immediately. Before you do that, you have to ask for certain information and conduct the procedure according to protocol. 

What is its purpose?

There are more than one good reasons why this type of protocol is needed. After all, it’s the only thing that can ensure that both sides conduct themselves fairly and reasonably. That is especially needed in a matter like the recovery of lent money. Court proceedings are not something to be taken lightly and need proper management. Another purpose this debt recovery protocol serves is to open up a path other than legal action. This can save a considerable amount of expenditure for both parties. 

So, it is all about guiding them on how to proceed with the matter as well as how to resolve it reasonably. Needless to say, it is compulsory for you and your debtor to follow. 

Who has to follow it?

Different protocols have been made for various cases. So, you might not have to follow this one, depending on certain factors. This debt recovery protocol in question is only meant for dealing with individual debtors. So, if you’re collecting from another institution, there are a different set of rules for you. 

Are you collecting mortgage repayments? You have a different protocol to follow in that case. And, if you’re wondering, you don’t need to follow two of them at the same time. Who has to follow which one is clearly defined, so you do not be confused. 

What does it say about claiming the debt?

As you probably know by now, you cannot go straight to court by any means. Moreover, you might not want to do so anyway as there are simpler ways to solve the issue. The debt recovery protocol says you have to let the debtor know about some essential details first. To do that, a letter or mail is undoubtedly the best means as you can keep a copy of them. It will come in handy if you have to go to court. Also, a letter is usually the go-to method for claiming debts. 

First, you must mention the amount that you need to collect. Have you bought the debt or collected it on behalf of someone? Many businesses do so. In such cases, you have to mention who was originally the creditor, don’t forget to mention when you acquired it as well. This is very important to clear any confusion on the other side. You also have to include any charges such as interest along with this information. 

Remember to mention the terms that were formed for the agreement as well. The more detailed way you can present it, the better it would be. Are they already offering a fixed amount every month and you find it insufficient? This is your chance to state the facts clearly to them. Also, don’t forget what you want them to pay. 

Lastly, there can be various methods in which they can repay you. However, you might not be able to allow some of them, then do mention which ones you can. Generally, the more ways you provide them to ease the repayment, the easier it gets to receive the payment. As a result, it allows you to recover the amount faster and more easily. Also, do mention where they are supposed to send the reply.

Include statement

Apart from the details mentioned above, there are some more that you have to provide. There are accounts that you keep for each debt. These contain the information of the amount paid, charges added, and other essentials. You have to provide all of these details up to date. It is mandatory to include these details, and your claim would be incomplete without them.  

What does it say regarding response to the claim?

Not only the claim but the response to it has to follow certain rules as well. As a debtor, there would be certain information that you must provide. Do you have any doubts about whether you owe any money? Do you find any discrepancies in the claim? Then you have the right to ask the other side for certain documents to clear your doubt. 

Even though it doesn’t happen frequently, creditors can make errors in this regard. So in case of any doubts, you must have them cleared properly and proceed with the matter only after that. 

Have you received the claim after already completing the payments? You have to provide documents that prove it. Payment receipts would be enough for that. You have to attach these to your reply form. This would also be helpful when the creditor hasn’t written off the amount you’ve paid and has claimed it. 

Matters like this are understandably complicated and the debtor may need time. Not only that, but they also probably need help as well. After all, not everyone is proficient in these matters. If you want to get help from an adviser, you must mention it. In that case, the people you owe will have to give you the time you need. However, they will grant you only a reasonable amount. 

The financial details such as spendings and earnings are also crucial. So, the debtor has to include these according to the protocol. You must provide all the information related to it and hide nothing, otherwise, it will get you in trouble. 

Next comes the matter — whether you’ll be able to pay the full amount or not. You can go for monthly repayments if that’s more convenient for you. Apart from that, you can also let the other side know of any arrangement that you have in mind. However, it will be effective if both sides agree. Also, you can ask for some time to start paying. They might agree to it if they’re convinced of your financial problems. So, the details you provided might help in ensuring that. 

This reply form is compulsory to be posted within 30 days. So, you need to finish it well before that time ends. After all, it might not reach them right on the next day. However, you can get extra time, if they’re convinced that you need it. 

What solutions does it provide to disputes?

There are many aspects of a claim that must be taken care of. After all, it’s not as simple as you might think. There can be disputes regarding any parts of the claim, especially the interest and other charges. They are quite common and therefore must be regulated. That’s where the protocol comes into the picture. It provides a way to solve any dispute, that too without resorting to legal action. 

Both sides can simply ask to provide documents for clearing any doubts about any aspect. If the other party can’t do that, then they have to show a good reason for it. This way both sides get equal opportunities to raise and clear disputes. Needless to say, it is quite helpful to proceed with the matter. 

Alternatives it provides to legal proceedings

You don’t necessarily have to go to court for arrears someone owes you. According to the current protocol, there are alternative options open to you. You can simply discuss the matter with the other side or negotiate with them. Otherwise, you can also get a mediator, if you’re unable to reach an agreement. 

However, once you opt for another method, you have to start afresh if you want to take legal action. In other words, you have to send the claim letter all over again according to the debt recovery protocol. 

What happens if you don’t comply?

You might be unable to find another solution and decide to start court proceedings. In that case, you must have complied with the protocol properly. They might not take into account minor non-compliances. However, there shouldn’t be a major one. Otherwise, they will take action against you. 

If the debtor doesn’t reply within 30 days, you can apply to increase their due amount. On the other hand, if you haven’t complied, they’re going to deduct all the interest from the debt. You’ll only be able to recover the principal. So, it is of utmost importance for both sides to treat the protocol seriously.