PAYMENT & SETTLEMENT ARRANGEMENTS

Making arrangements for payment over time or accepting less than the entire amount of our client's claim in full and final settlement happens frequently.

Quite often, the main reason that a debt is not paid is because the debtor does not have the money to pay it in one payment. In these circumstances, we have little choice except to set up an arrangement for payment over time.

eColllect always tries to obtain the highest level of payments possible. But the truth is we can never be sure that we have done so. We do not have access to the records of the debtor and are largely relying on what we are being told about their financial position. Debtors are not legally required to provide such information until a court order is made. This could be done at a cost to our client. eCollect always attempts to negotiate the best possible result for our clients and will not commence a payment arrangement until we believe that higher level of payments could not be obtained without significant additional work being done by lawyers and with additional cost.

Our experience is that we need to allow debtors to make payment arrangements that they feel comfortable with. This brings a higher likelihood of the payment arrangement being kept.

Remember also that any additional work will take time to complete and has no guarantee of improving the position. Failing to make a payment arrangement usually ends up with weeks or months passing with the only change being money out of our client's pocket for legal costs.

There are other benefits to accepting the payment arrangement.

The standard repayment agreement used by eCollect has a clause in which the debtor acknowledges the amount of the debt. This means that the debtor cannot, in the future, claim that the debt is not owed. This is very important because it goes a long way to removing any defence to a claim brought in court in the future.

Our clients often say "So what, they owe me the money, what extra benefit is this". Clients sometimes do not understand that when debtors are faced with legal proceedings for a amount owed, it is quite usual for there to be a defence lodged alleging some defect in the goods or services provided or giving some other reason why the debt should not be paid.

Whether or not the debtor's claims are correct or not, our clients are then faced with the time, effort and a significant cost in taking their claim through the legal process to a final hearing. In the vast majority of cases, our clients are successful. But some debtors do succeed in reducing or even avoiding the amount claimed.

Whenever a claim for debt is defended, there is a risk of not being able to prove the claim. This risk is increased if written documentation about the claim is not available or is limited.

Our experience is that having the amount of debt clearly acknowledged in writing represents a real benefit.

As a part of our ongoing engagement on your behalf, we will continue to follow up the payments to make sure that the debtor knows that they are liable to pay.

In the event of an ongoing failure to pay, the entire amount due becomes immediately payable and we would probably recommend that you commence court proceedings at that time.

Remember that any court proceedings based on a failure to make payments under an agreement have the benefit of the acknowledgment of debt which should prevent defences to the claim.

Our clients need to be aware that legal proceedings in most jurisdictions have the ability to allow for debts to be paid by instalments. This is very common and you might find that you take the matter through the court process at some cost to you only to find that the debtor is allowed to pay by instalments anyway. Admittedly, the legal costs and interest will probably be included in the amount to be paid but this is outweighed the loss of time and the amount of effort needed from you in the litigation.

Whilst payment arrangements are not an ideal conclusion to a debt recovery matter they are usually a better option than legal proceedings and, if handled properly, will strengthen your position for legal proceedings in the event of a default.

Ref: CLIENT INFO SHEET - Payment and settlement arrangements
Authorised by: James Woods
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Last Update: Thursday, 13 November 2008