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Chapter 16 - Debt recovery. At the end of this chapter you should understand: the steps that should be taken before deciding to grant credit to an applicant, the steps used to encourage punctual payment of debts, the steps in the debt collection process,...
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Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev 2-1 Debt recovery Chapter 16 Copyright â 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-2 Learning objectives At the end of this chapter you should understand: • the steps that should be taken before deciding to grant credit to an applicant • the steps used to encourage punctual payment of debts • the steps in the debt collection process • the matters that should be considered before commencing legal proceedings • how a creditor selects the appropriate court in which to institute proceedings • the process by which a judgment is obtained against a debtor Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-3 Learning objectives (cont.) • how to apply the processes by which judgment is enforced against a debtor, including: – – – – – examination process writ of execution garnishee order instalment order bankruptcy or winding up order Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-4 Introduction • Goods and services are often provided to people who fail to pay for them • Those who owe money are called debtors • Those who are owed the money are their creditors • There are strategies that encourage repayment of debts and debt collection processes Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-5 The decision to grant credit— creditworthiness check • Proof of identity of applicant: – Name – Address – Assets and liabilities – Employment status • If a company: – Names of directors – Addresses of directors – Paid-up capital of company • Credit references • Confirm ownership of property Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-6 The decision to grant credit— credit policy • Credit policy should be notified to debtor, e.g – When payment is due – Acceptable methods of payment – Interest charges for late payments (default interest) Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-7 Incentives to encourage punctual payment of debts • Discount for early payment • Credit charge for late payment • Notification of overdue accounts: – account rendered sent – personal phone call Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-8 Steps in the debt collection process Account rendered (For unpaid account) Letter of demand Details of debt Date debt incurred Specify date payment to be made Specify legal proceedings will result Payment made Negotiation, mediation or arbitration Affidavit of service Proof of service of summons Service of summons Given to defendant Debt collection agency Legal proceedings Court issues summons Particulars of claim: Names—plaintiff and defendant Addresses—plaintiff and defendant Details plaintiff’s claim Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-9 Defendant—possible responses Service of summons Agrees to pay in lump sum Agrees to pay in instalments Through court Dispute claim via filing defence For defendant Finish Judgment against defendant (judgment in default) For plaintiff Judgment Plaintiff — judgment creditor Defendant —judgment debtor Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-10 Enforcement of the judgment Enforce the judgement Examination summons / oral examination Ability of debtor to pay is examined INSTALMENT ORDER Payment by instalment EXECUTION AGAINST GOODS Seizing goods of debtor and selling to satisfy amount owing GARNISHEE ORDER Paid on behalf of debtor by employee or bank (ATTACHMENT OF EARNINGS ORDER) BANKRUPTCY PROCEEDINGS Debt > $5000 EXECUTION AGAINST LAND Sell land owned by debtor at public auction Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-11 Unacceptable conduct when collecting debts • National Consumer Credit Protection Agency Act 2009 (Cwlth) – Section 99 prevents debt collector from entering residential property to repossess goods • Australian Consumer Law – Section 168 prohibits the use of physical force, undue harassment or coercion – Section 18 prohibits misleading and deceptive conduct by persons engaged in trade and commerce – Section 21 and 22 prohibit unconscionable conduct by persons engaged in trade and commerce Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-12 ... recovery Chapter 16 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev • 2-2 Learning objectives At the end of this chapter you... encourage repayment of debts and debt collection processes Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev • 2-5 The decision... references • Confirm ownership of property Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev • 2-6 The decision to grant credit—