Lending money can be a stressful and unpleasant experience. If you have loaned money to friends, family or close associates, the process of recovering the money can also take an emotional toll. Consequently, deciding when to collect – and when to forget – is critical.
There are several factors you might want to consider when deciding whether to collect a debt.
1. Has the debt simply been overlooked or forgotten?
Depending on your relationship with the debtor, a friendly reminder can often be more productive than a formal letter of demand.
2. How much time will you spend pursuing the debt?
Time is money, so if the debt is small, it is sometimes more effective to spend time looking for new business.
3. How long have you waited to collect your debt?
Some time limits apply to debt collection. If you wait too long, you may not be able to pursue what you are owed.
4. Is the debtor able to pay?
Consider whether the debtor is solvent. If they will be unable to pay you even once they’ve liquidated their assets, it may be best to negotiate a payment plan or engage in External Dispute Resolution.
If the debtor is still unable to pay, you may be able to retrieve the funds from a guarantor or co-borrower. You could also enforce your legal claim to a security interest (if you have one) such as a charge over the debtor’s mortgage or their company’s assets.
Forgiving a debt can be a very challenging process, especially as doing so involves relinquishing a right to collect what you are owed. Engaging an experience lawyer can help you determine when and how to pursue a debt.
If you require any further assistance in recovering a debt or wish to speak to a legal professional to assess your individual circumstances, please do not hesitate to contact our office on 8917 8700.