Determine the best debt collection approach – Finance and Banking


South Africa: Determine the best debt collection approach

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It is essential that any business, especially those that offer products or services on credit, manages its debtors effectively, particularly in terms of payment terms. This can be done by identifying and distinguishing between your slow debtors (also slow debtors with whom the business intends to continue its relationship) and non-paying debtors.

Determine the appropriate approach.

With debtors who are slow to pay, it is generally advisable to follow a “soft collection” process. The purpose of soft recovery is to negotiate an appropriate repayment plan that will benefit both parties, rather than initiating costly formal legal proceedings against them.

Where there are slow or non-paying debtors that the company wishes to pursue a relationship with for whatever reason, it would certainly not be advisable to pursue formal legal proceedings, as this would obviously strain the business relationship. . An alternative approach would be to negotiate a written payment agreement between the parties (normally more beneficial to the debtor, but with the broader objective of continuing the relationship).

In the case of non-compliant debtors – debtors who make no payment – then a soft collection process is not advisable, as the debtor will likely end up not paying in terms of the repayment plan. In this case, the pursuit of a formal litigation procedure against the defaulting debtor is preferred.

Undefended disputed debt collection.

The collection process will normally be initiated by a demand letter – a letter demanding payment from the debtor within a reasonable time (normally between 7 and 10 working days).

If the debtor does not respond to the formal notice in time, a summons must be issued to the court. The summons is another formal demand for payment containing the material terms of the claim against the debtor.

Service (hand delivery) of the summons issued to the debtor must be effected by the sheriff of the court. This process can take up to a month, depending on how quickly the debtor’s whereabouts can be determined.

Once the summons has been served in due form, the debtor will have ten business days to register a notice of his intention to defend the action. If the debtor fails to do so, the case will be an undefended action and the plaintiff can then seek default judgment from the court.

This application for default judgment may be considered by the magistrate or judge in open court hearing oral arguments, or upon plain sight of the documents by the clerk or clerk of the court, depending on the court in which the action was brought. , the complexity of the claim and the amount claimed. The Court may take up to two (2) months to issue a default judgment.

The execution process.

The granting of a default judgment presents a few options for the plaintiff, one of which involves a warrant of execution against the debtor’s personal property to be issued by the court.

The sheriff will then be responsible for serving the execution warrant on the debtor and establishing an inventory (or “attachment”) of the personal property that may be sold under a sale-execution, in the absence of payment arrangements.

The warrant of execution remains in force for four (4) months from the seizure of the personal property, and it is a criminal offense to dispose of the personal property during the period of seizure.

If the debtor still fails to make adequate payment arrangements after the seizure of the goods, the plaintiff may order the sheriff to remove the seized goods from warehouse and proceed with the organization of a public auction (or ” sale in execution”). The funds collected from such an auction will then be applied to the debt due.


A formal litigation process, whether undefended or not, can be an expensive process and must always be weighed against the likely return or outcome in each case. Debt collection based on written contracts can present various pitfalls and it is recommended to contact an experienced commercial litigation attorney to assist in debt collection against non-compliant debtors in a successful and commercially viable manner.

Originally published August 30, 2021

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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