There might arise circumstances when you lend someone money, business services, or goods and they refuse to pay you back. That someone might be a trusted friend, a client, or even a company. The amount is now stuck and you’re not getting it back. In such circumstances, the friend, client, or the company becomes a debtor. This is where debt recovery proceedings come into play.
What does a “Debtor” Mean?
To start a debt recovery proceeding, one needs to know who the debtor is. A debtor is a person who owes you money. This is the same person who has refused to pay you back. One needs to figure out if the debtor has the financial resources to pay back the money owed. It is also important to know whether the person has outstanding debts valued at $15,000 or more and if that person has filed for bankruptcy. If the value of debt is the said amount and no bankruptcy has been filed, then commencing a bankruptcy proceeding against that person is an option. A debtor may feel threatened and repay the amount since bankruptcy results in personal restrictions.
The Debtor’s Assets
Assessing the assets of the debtor is the second most important step. If the debtor has no financial resources to repay the amount, commencing legal proceedings against him might be a waste of time. This is where one should hire a lawyer as they can evaluate the net worth of the debtor and if he can indeed pay the amount back. Lawyers can assist you with the following:
1) The financial circumstances of the business.
2) Available assets for attachment, if any.
3) Cash flow income of the business.
4) For an individual debtor, their employment status.
The main objective of a debt recovery proceeding is to recover the money the debtor owes you. Thus, if the debtor is in a tight financial situation, it might not be economically viable to commence a civil proceeding against such a person. In such scenarios, negotiation with the debtor on a payment plan might be a better option and much more cost-effective. A lawyer can also help in formulating a payment plan for the debtor to pay you back after evaluating all the circumstances.
Who is a Debt Collector?
One can hire a debt collector who is a specialist in debt collection to collect the owed amount from the debtor. The objective of the debt collector is to reach an agreement between the debtor and the creditor by creating a suitable environment for the repayment of the money. Singapore does not have any legislation in place for debt collection proceedings, instead, debt collectors follow a Code of Conduct when dealing with debt collection in Singapore.
It must be noted that debt collectors may take actions that might turn out to be illegal for the recollection of the amount from the debtor. Although no legislation is in place, their actions might still be susceptible to criminal charges. For example, threats, abuse, insulting words, behavior that causes the debtor to believe that unlawful actions will be taken against him, etc. The debt collectors in such a scenario may be charged accordingly. A debtor may also report a creditor to the authorities or file charges if they believe that the creditor was behind such harassment caused to him.
Options Available for Debt Recovery
There are several options available for the recovery of the debt. These options can be categorized broadly into two groups. They are out-of-court options and in-court options. Out-of-court options are those options when debt can be recovered without commencing any legal proceeding against the debtor. In-court options are generally used when out-of-court actions fail and one has to commence legal proceedings in a court.
1) Negotiation: The creditor and debtor may sit to re-negotiate a repayment plan for the debt owed. This can be done by offering a longer period for repayment or a discounted amount for repayment. The aim is to mutually settle with the debtor without incurring legal costs. The debtor may not accept the offer and a settlement might not be reached but it is still the most cost-effective option for the recovery of debt. Other options are available if this fails.
2) Hiring Debt Collector: The creditor may choose to work with a debt collection agency if he has no time to pursue the debtor. The debt collectors will try to reach an agreement with the debtor. However, whether the debt collection agency complies with the law and does not take illegal actions, must be checked by the creditor before hiring.
3) Letter of Demand: Creditors may hire a lawyer to send the debtor a letter of demand. This is a letter that states the actual amount owed by the debtor, the severity of the situation, and the consequences of non-payment. Generally, this option is used to pursue evasive debtors and such a letter may provoke the debtor to give a response. A letter of demand can also be used later on in court proceedings as evidence of debt recovery attempts by the creditor.
1) Small Claims Tribunal: A creditor can file a claim in the Small Claims Tribunal (SCT) when the amount owed is less than $20,000. The lodging fees are not very expensive in SCT and one does not need to hire a lawyer to file a claim. The claim limit is $20,000 unless both the creditor and debtor raise it to $30,000. The claim can be filed online through the Community Justice Tribunal System via CorpPass or SingPass. It is a relatively quick dispute resolution system. Decisions given by the SCT can be enforced as a judgment given by a court. Schedule One of the Small Claims Tribunal Act provides for the situations when a claim can be filed in the SCT for debt recovery. It includes debt from a lease not exceeding 2 years and arising out of a supply contract but excludes loan cases, among other situations.
2) Civil Proceedings: Creditors may commence civil proceedings against the debtor for debt recovery in a court. This option is economically viable if the amount owed is not low and the debtor is financially capable of repaying the amount but refuses to do so. Creditors may hire a lawyer for this option and if they successfully prove that a debt is owed, then the court will pass a judgment in favor of the creditor. The order can be enforced through a Writ of Seizure and Sale (WSS) or garnishee order. Through a WSS, the court appoints an officer to seize and sell the debtor’s property and the amount received is used to repay the creditor. A garnishee order is given when a third person owes money to the debtor himself. The creditor can directly claim the amount owed by the debtor from the third person. For example, A owes B money. A is the debtor and B is the creditor. C is a third person who owes A money. B can directly claim the amount from C without C repaying his debt to A.
3) Bankruptcy Proceedings: A creditor can commence bankruptcy proceedings against a debtor if the total debt owed by the debtor exceeds $15,000. This option should only be availed if the debtor does not have any financial resources to repay the money owed. It should be noted that creditors generally recover only a fraction of the amount because the property of the debtor is divided among all the creditors. When a bankruptcy proceeding is commenced, the interests on the sum stop accumulating as well. The court appoints an Official Assignee to manage the estates of the debtor and arrange a plan for the creditors to recover their money.
Procedure for Debt Recovery
The steps for the recovery of debt are unique in each case. One should hire a lawyer to figure out the best option for debt recovery. The general procedure for debt recovery is mentioned below.
1) Step 1: The first step is to initiate a consultation with a lawyer. This will help the lawyer in understanding the circumstances surrounding the debt owed by the debtor. It will also help the lawyer figure out the best possible steps to take for the recovery of the amount owed.
2) Step 2: Evaluating the debtor is the next step. Assessing the circumstances surrounding the debtor and assessing his assets. Specifically, if the debtor has the financial resources to repay the amount and if civil proceedings are required.
3) Step 3: Issuing a Letter of Demand is generally the next step. This formal document will be issued by the lawyer stating the total sum owed, the severity of the situation, and the consequences of non-payment. It might help to get a response from an evasive debtor and this document is also applicable as a piece of evidence in the court.
4) Step 4: Waiting for a response and if a response is received then negotiating with the debtor is generally the step after issuing a Letter of Demand. A time limit is mentioned in such a letter and a response is obtained from the debtor within that time limit. A payment plan with the debtor may be negotiated with the help of a lawyer evaluating all the facts and circumstances.
5) Step 5: If an agreement is not reached or a response is not received, a creditor may commence court proceedings against the debtor for the debt recovery. The legal papers have to be filed on time and the creditor has to prove to the court that a debt is owed. If successful, the court will issue an order in favor of the creditor to recover the amount from the debtor.
6) Step 6: Even after an order is given by the court, a debtor may still not repay the amount owed. Enforcing the order is the next option that can be done through WSS, mentioned above, or through other legal means. A lawyer can provide the best possible solution for the enforcement of the order.
Procedure for Enforcing the Order
Even after the court passes a judgment in favor of the creditor, the debtor may still refuse to pay the money owed, back to the creditor. In such a scenario, a creditor must enforce the order passed by the court either through a Writ of Seizure and Sale (WSS) or by obtaining a Garnishee Order. After a judgment is passed in favor of the creditor he becomes the judgment creditor and the debtor, who owed him money, becomes the judgment debtor.
Writs of Seizure and Sale
One of the ways to enforce an order in favor of the creditor is by requesting the court to authorize a Bailiff to seize and sell the property of the debtor to recollect the amount owed to the creditor. Officers of the court called Bailiffs are empowered to handle enforcement proceedings. For example, if a debtor, even after the order passed by the court, refuses to repay the money owed but owns a piece of expensive jewelry, the court may grant Bailiff the power to seize that expensive jewelry and sell it to recover the amount owed to the creditor. The Bailiff can access the debtor’s premises to seize the property. Such property may be sold in public auction to recover the debt amount.
One should consider the following factors before filing a Writ of Seizure and Sale.
a) Whether the judgment debtor is bankrupt.
b) If the judgment debtor has any assets which are applicable for seizing.
c) The total amount of the debt owed.
d) If there are other enforcement proceedings against the debtor.
e) The premises to be searched belong to the judgment debtor or not.
Procedure in Brief for Writs of Seizure and Sale
1) After making an application through one’s lawyer, an Appointment Letter informing about the execution date will be sent to the creditor, once such an application is successful.
2) On the given date one must arrive at the Bailiff’s Section of the State Courts with the Appointment Letter, Official Receipt of Payment, a signed Letter of Authorization, and duly signed Indemnity.
3) The next step would be to go to the premises to seize the property the creditor has identified. The premises might or might not be accessible and if not the Bailiff will leave a notice at the premises. If the premises are accessible, then the Bailiff will give guidance on what assets can be seized.
4) After a few properties have been seized, the judgment debtor will be given seven days to pay up the debt amount. A valuation report of the seized property is also required at this stage.
5) If the debtor still refuses to pay back the owed amount, the creditor can proceed with selling the properties in a public auction by applying for a Request to Proceed with Auction. An auction date will be fixed within 3 to 5 weeks and the Bailiff will inform the creditor about the same.
A garnishee is someone who owes the judgment debtor money. This is another way to enforce an order in favor of the creditor. Through a garnishee order, a garnishee is obligated to pay the judgment creditor instead of the judgment debtor. A garnishee can be a person or a bank. The proceedings for a garnishee order are governed by Order 49 of the Rules of Court. Thus if a debtor has money in a specific bank account, the creditor can ask that bank instead to pay him the debt owed by the debtor directly. Since technically a bank “owes” the client the money the client deposited in the bank, a garnishee order can be directed towards a bank as well.
Procedure in Brief for Garnishee Order
1) The creditor has to apply for a provisional garnishee order by filing summons supported by an affidavit.
2) Once the provisional garnishee order is granted, a date will be set for the proceedings, where the garnishee can contest why such order should not be made final. Meanwhile, the debt owed by the garnishee to the judgment debtor will be “frozen”.
3) If the garnishee does not contest the proceedings or fails to show up, then a final order will be passed. In the case of a contest, the judgment will be passed after hearing both parties.
4) If another party claims that the garnishee owes him money too along with the judgment debtor, the matter will be determined after the court orders such a party for an appearance in the proceedings.
5) Once a final order is granted, the garnishee is obligated to pay the amount stated in the judgment to the judgment creditor.
Police Complaint about Money Owed?
Personal loan cases are civil cases rather than criminal cases and thus filing a complaint with the police is not the right way to recover the debt amount from the debtor. The police will not be able to assist if someone owes money to someone else.
Cases Concerning Debt Recovery
1) Ho Soo Fong v Ng Chuan Hwa and others  SGHC 176
This case was an appeal against a judgment given by the District Judge. The appellant gave loans to a company and the respondents were ex-directors and present directors of the company. When the company was facing cash flow problems, they approached the appellant for lending the company money which the appellant accepted and the respondents agreed to be the guarantors of the loan. Although the District Judge allowed the petition for a specific amount to be repaid, he dismissed a larger part of the debt owed. The Court, in this appeal, after giving thorough consideration to all the evidence and circumstances, concluded that the appeal was justified and ordered the company and the second respondent to repay the amount owed to the appellant as well as the costs of the trial along with the appeal.
2) Mohan Singh s/o Bhola Singh v Shran Jeet Singh  SGHC 277
The plaintiff alleged that he lent the defendant a huge sum of money for the defendant to invest in two companies. The defendant on the other hand claimed that the plaintiff had invested in the shares jointly with the defendant and he owed no money to the plaintiff. The Court, after a thorough evaluation of the evidence, concluded that the plaintiff had indeed lent the defendant the alleged sum of money which the defendant was bound to repay. The claims of the plaintiff were allowed at a 6% interest.
3) Mann Holdings Pte Ltd and another v Ung Yoke Hong  SGHC 69
This case was an appeal against the decision of the Judge who had ordered the defendant to repay the amount he received as a loan from the plaintiffs. The defendant in the appeal claimed that the amount given was included in a drafted Sale and Purchase Agreement (SPA) and was not a loan agreement, thus he was not liable to repay any loan. The Judge concluded that the defendant failed to prove his alleged claims about not giving effect to the loan agreement while the plaintiffs successfully proved that it was indeed a loan and not a non-refundable deposit and thus the judgment was given in favor of the plaintiffs.