By Farah Einstein, Senior Associate and Nadia Shaik, Associate of Hadar Incorporated, Specialist Property Law Firm
This article first appeared in Asset Magazine’s February 2023 edition

Most landlords have likely experienced the frustration of having a debtor owe them money but not simply not paying. As a result, the landlord may have even taken the steps of instructing attorneys, incurring costs, and obtaining a judgment against the debtor but without any idea how they will subsequently actually recover the funds. The truth is, recouping payment from a debtor can be a challenging process.

There are however steps which one can take to increase the prospects of recovery. Understanding the process and the options available to you will hopefully help empower you whilst somewhat managing your expectations.

Using a judgment to prompt payment from a debtor

A judgment affords you a certain amount of power over the situation. As a judgment creditor, you are entitled to attempt to execute against the judgment debtor at any point for 30 years after the judgment is granted. In addition, judgments automatically cause the debtor to be listed on the various credit bureaus, which negatively impacts their credit scores/ratings. In other words, judgment debtors will struggle to obtain even the lowest form of credit such as cellular phone contracts or nominal lines of credit. This alone provides a real incentive for them to settle the debt.

Practical approach

The first practical step after securing a judgment is to actually inform the debtor that a judgment has been granted against them. When they become aware of the fact that it is in force for 30 years and are made aware of the ways in which this can disadvantage them (as above), a debtor will often seek to settle the debt or to offer acceptable payment terms to the creditor.

If the debtor does not respond to this, there are various methods of execution that can be pursued.

Tracking down an evasive debtor

An obstacle that a creditor may face is not being able to easily locate a debtor or the debtor deliberately providing inaccurate or incomplete information in an attempt to evade the Sheriff of the Court. In these cases, tracing agents are used to establish the debtor’s true whereabouts and to verify relevant details. This then allows a creditor to pursue the various avenues available to it in execution of the judgment.

Execution

One such method is to instruct the Sheriff of the Court to attend the address at which the debtor’s possessions are likely to be kept. This can include their home (when the debtor is an individual) or business premises (when the debtor is a company). This action can prompt immediate action from the debtor, as it frightens them into making payment to prevent the removal of their assets.

This process is also invasive and carries a social stigma, which can further motivate the debtor to settle the debt. Imagine the effect on the employees of a company when the Sheriff attends the business address of a debtor and attaches computers, furniture and other equipment.

Each attachable item will then be assigned a value. If there is sufficient value, these items can then be sold at a Sheriff’s auction. In this way, it is possible to recover part of the judgment debt, and in certain cases, all of it.

The process of attachment is very often an extremely effective way of forcing a debtor to settle the judgment or to negotiate a repayment plan, being the point of the exercise.

Attaching a bank account

A speedy recovery option is the attachment of a debtor’s bank account. This is an automatic mechanism available to creditors if judgment is obtained in the High Court. It enables the effective freezing of a debtor’s bank account and the immediate transfer of funds contained in such account directly to the Sheriff and, in turn, to the creditor. This not only provides the fastest means of recovery, but also provides an indication of the debtor’s financial liquidity.

Further avenues to recover a judgment debt

If a Sheriff’s auction has taken place but the judgment debt is not satisfied, there are still several options available to a creditor. These include garnishee orders, the sale of immoveable property, and financial enquiries, among others.

We will cover the alternative options available to a creditor seeking to recovery on a judgment debt in part 2 of this article next month.

Overall, it’s important to remember that the process of recovering a judgment debt can be challenging, but with the right approach and the help of experienced and practical lawyers, it is possible to recover the funds that are rightfully owed to a creditor.