Business litigation: Unpacking the dreaded term… Debt collection – Litigation, Mediation & Arbitration



South Africa: Business litigation: Unpacking the dreaded term… Debt collection

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It is not uncommon for businesses to sell goods or services to consumers on credit. However, once a consumer has agreed to a credit agreement, they become responsible for paying that debt, usually through monthly installments. Therefore, when a consumer is in default, the business is entitled to take legal action against the debtor to collect the unpaid debt. This article will discuss how a business can collect an unpaid debt using the litigation process.

Letters of formal notice

Generally, the creditor has no obligation to deliver a demand letter to the defaulting debtor before taking legal action. However, the letter serves to alert the debtor of the amount of the debt and to specify the default. It is important to note that such notification is a requirement under Section 129 of the National Credit Act 34 of 2005, as amended.

The letter further serves to inform the debtor that the creditor will take action against him if he remains in default. In other words, a possibility is offered to the debtor to settle the debt outside the courts, which avoids the creditor the legal costs. If the debtor remains in default, the creditor can continue the contentious procedure, that is to say the summons.

Obtaining an execution warrant

When a summons is served on the debtor, and he does not defend himself against it, the creditor can obtain a judgment against the debtor to pay the unpaid debt plus the interest and court costs incurred. It is important to note that a debtor must submit his notice of dispute of the debt within 10 days of receipt of a summons1. The creditor can then use the judgment to obtain an enforcement warrant against the debtor.

A warrant of execution will be used to order the sheriff to seize the debtor’s assets, which will then be auctioned off, and the proceeds will be used to collect the outstanding debt and any other costs incurred during the litigation process. A warrant of execution can be obtained for movable property2and building3 property. Alternatively, the creditor can obtain a garnishment order4 (where the unpaid debt will be paid by a third party if the latter is indebted to the debtor) or an emoluments order5 (when part of the debtor’s salary is attached to the outstanding debt). Finally, a creditor asks the court to investigate the debtor’s financial situation and make any order it deems fair and equitable to settle the unpaid debt.6


Companies offering credit facilities are likely to encounter debtors who refuse to repay their debts. Thus, the disputed procedure allows these creditors to recover the sums owed to them, thus avoiding a substantial loss.


1. Rule 13(1) of the Magistrate’s Court Rules and Rule 19 of the High Court Rules.

2. Rule 41 of the Rules of the Magistrate’s Court.

3. Rule 43 of the Rules of the Magistrate’s Court.

4. Rule 47 of the Rules of the Magistrate’s Court.

5. Rule 46 of the Rules of the Magistrate’s Court.

6. Section 65A of the Magistrate’s Court Act 32 of 1944.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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