Lawful processes to recover debt

GIVEN the current financial climate, there is likely to be increased default on financial obligations resulting in creditors being forced to take steps to recover debt.

Many debtors faced with default take advantage of the slow pace of justice. The reality is, however, that the vast majority of creditors delay before taking steps to recover, which impairs the likelihood of recovery. Although it is open to a creditor to take steps to commit a debtor to prison for non-payment of a judgment debt, the possibility of recovery is greater if the debtor owns assets. The optimal position for creditors is to have the debt secured by saleable assets. Debt can be recovered without court action by enforcement of validly held security usually in the form of bills of sale over motor vehicles, mortgages over real estate and charges on shares. However, where the security is likely to be insufficient to cover the extent of the debt it may be wise to simultaneously institute litigation with a view to going after assets which were not so pledged. Some creditors take corporate as well as personal guarantees to give a broader pool of assets from which the debt can be recovered. In the case of unsecured debt, a creditor must consider whether to institute court proceedings. Court is too often considered a last resort and many do not consider the six years time bar for debt actions. A creditor must bear in mind that a claim made more than six years after the default, or the last payment or the last written acknowledgement of the debt affords a debtor a solid defence. Affording time to a debtor is not always discouraged, but must be done while securing the creditors’ rights. This can be done by obtaining written acknowledgement of the debt or some security for the debt to hold if a payment arrangement is being considered. A debtor may not for instance be “liquid” but may have other assets such as shares that may be pledged to the creditor in consideration for his delay of recovery action. The litigation tactic employed will depend on the particular circumstances of the case. For instance, it may be more effective in the case of a corporate debtor to institute winding up proceedings for inability to pay its debts as opposed to filing the claim for a judgment debt, which would then have to be enforced. A freezing order is a tool which may aid in the debt recovery process. A freezing order restrains a party from removing assets located in the jurisdiction and/or restrains a party from dealing with any assets whether located in Jamaica or not. The assets usually frozen are bank accounts, but other assets such as land and even the proceeds of a letter of credit can be frozen. Freezing orders do not equate a creditor to the status of a secured creditor and are not granted lightly, since it affords the creditor a freeze on debtors’ assets before the creditor has even been awarded a judgment in respect of the debt. These orders can only be made by the court and are completely at the discretion of the judge who has to be persuaded not only that there is a good arguable case against the debtor, but also that there is a real risk that the debtor will dissipate or conceal the assets to defeat a judgment. Further, there may be an order directing a party to provide information about the location of relevant assets or to provide information about relevant assets which are or may be the subject of a freezing order. The debtor’s bank, even if not a party to the action, may be ordered to disclose documents relating to the debtor’s bank accounts. The court will not, however, allow the disclosure order to be used as a mere fishing expedition. Once a judgment for a sum of money is finally obtained it can be enforced by sale of assets, but if not sufficient, the last recourse is to take committal proceedings against the debtor. Since many of the above processes require the physical location of the debtor it would be very advisable to keep and track the debtor’s residential and business addresses. Maliaca Wong is a Partner at Myers, Fletcher & Gordon and a member of the Firm’s Litigation Department. Maliaca may be contacted at or through This article is for general information purposes only and does not constitute legal advice.


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