DEBT RECOVERY IN NIGERIA

Considering some prevailing unpleasant economic situations and the large flux of Nigerians leaving their motherland in search of greener pastures, it is not far-fetched for a creditor to resort to just any means of retrieving a debt sum from a debtor, more so when such a debtor is “dragging his feet” or not coming up with any reasonable repayment plan. 

This article highlights what not to do and what to do while attempting to recover a debt. 

Concerning this article, a “debt” is a specified amount of money owned by one person (the creditor) and lent to another person (the debtor) with an agreement that the debtor would return the said sum at a later date.

WHAT NOT TO DO WHILE RECOVERING A DEBT SUM

• SLEEP ON YOUR RIGHTS- JI, MA SUN!

An action to recover a debt sum must be initiated as soon as the creditor notes a default.

By virtue of Section 20(1) of the Limitation of Statute Law– an action of debt recovery emanating from a simple contract must be presented to the court within six (6) years from the date the cause of action accrued. Section 12 of the Limitation of Statute Law further explains that a failure on the path of the creditor to bring a debt recovery case within six years would mean that the creditor has waived and forgotten his right of audience to enforce the debt recovery before the court. Equity aids the vigilant!

(This Limited of Statute Provision does not, however, cover debt recovery within the purview of AMCON, as provided for by Section35(5) of the AMCON Amendment No.2)

• RESORTING TO SELF HELP

“Desperate times call for desperate solutions. This saying, however, is not very applicable to debt recovery in Nigeria and here is why-

It has been stated many times that the police have no business enforcing debt settlements or recovering civil debts. In addition, the use of other extrajudicial measures, such as threats, thugs, diabolical attacks, defamation, libellous publications, malicious destruction of the debtor’s goods or properties, and other desperate measures with the hope of speedily liquidating a debt sum, have, in most cases, more profound financial and compensatory implications accruing to the creditor, which, the majority of the time, outweigh the debt owed.

More often than not, the debtor successfully prosecutes an action to enforce their fundamental human rights, claims a bountiful financial settlement from the creditor, and even buys more time to settle the debt.

WHAT TO DO WHILE RECOVERING A DEBT SUM

1. SERVICE OF A LETTER OF DEMAND

To formally initiate the process of retrieving a debt sum, a letter of demand must be written by the creditor or his legal representative and served on the debt. This letter of demand must contain the following- 

• A summary of the business engagement that led to the debt sum.
• The date money was passed from the creditor to the debtor, the specified amount borrowed. 
• The interest currently accrues on the debt sum.
• The initially agreed time the debt sum was supposed to be paid. 
• How long the debtor has been in default on payment.
• The newly stipulated date the creditor is expected to receive the repayment.
• Lastly, the steep and dire consequences if the creditor fails to receive the debt sum on or before the stipulated date. (Not necessarily as an attempt to threaten the debtor, but as an avenue to show that things would be much easier and faster by simply paying).

A letter of demand serves as a pre-action notice for the debt recovery proceeding in court. The letter is usually furnished as court evidence to establish the debt’s existence further.

2. APPROACH THE COURTS THROUGH LITIGATION

A creditor often reluctantly resorts to litigation when the debtor is obstinate about offsetting the debt. Litigation is the court way of debt settlement, where the debt recovery process is formally filed in court. It gives room for both the creditor and the debtor to state their cases, include extra requests, like higher or lower interest rates, call witnesses, and whatever judgement is pronounced by the court shall be binding on both parties. It is, however, advisable that litigation be resorted to only as a last option, as it can most times be time-consuming and emotionally draining, in addition to the enormous financial implications of hiring a legal representative.

3. APPROACH THE MULTI-DOOR COURTHOUSES THROUGH ALTERNATIVE MEANS OF DISPUTE RESOLUTION

This occurs when there is a willingness from both parties (especially from the debtor’s side) to communicate and compromise and when there are minimal inconsistencies and denials as regards the debt sum. Alternative Means of Dispute Resolution provide a flexible means of dispute resolution. Hence, whatever both parties agree to becomes binding on them.

Here, the creditor and the debtor have agreed to do away with court appearances and decided to go with a mutually agreed-upon term to offset the debt.

In conclusion, a debtor should reasonably attempt to offset the debt sum expeditiously and show loyalty and commitment to the creditor. Further delay invariably causes more expenses and needless inconvenience for all parties involved.