How To Determine If A Debt Is Genuinely Owed Or Not

how to determine debt

Debt recovery or money claims can be one of the most contentious issues of a commercial dispute.

It is not uncommon for monies that are allegedly owed to be recovered through court processes. If you have money owed to you or dispute a claim against you for money, it is important to approach legal practitioners such as our team at Lazarus Legal to actually determine whether a debt is genuinely owed or not.

Record Keeping

If you decide to approach our team, it is important to verify the details of the alleged debt. It is vital that you maintain accurate records to establish whether a debt has been completely or partly paid in order to decide the viability of going to court.

Letters of Demand and Negotiations

Before firmly deciding on whether or not to litigate, it is often advisable to send a letter of demand to the debtor. A letter of demand is usually the final opportunity for a debtor to respond to an outstanding debt before proceedings in court are commenced. The threat of litigation will sometimes be sufficient for debtors to take steps to make payments of alleged monies owed. Debtors can negotiate the debt and creditors must consider whether it is a sufficient compromise for the time, effort and expense of undergoing legal proceedings.

What creditors have to consider?

If you are a creditor in a claim it is important to consider whether or not it will be viable to pursue a claim against the debtor. Searches may need to be made to determine whether or not a debtor is solvent or own assets of adequate value. It will be important to establish whether or not a debtor has sufficient finances to pay any debt owed. If a judgment is granted in favour of a creditor, it is possible to seek payment by instalment with the debtor, or if necessary satisfying the debt through the sale of the debtor’s property and in rare circumstances instigating bankruptcy proceedings.

What if you’re a debtor?

If you are a debtor for an alleged debt we can try and assist you with negotiations with the creditor. If for example the quality of the goods or services provided did not meet the standards promised, you may be able to seek a deduction of the money you owe. Some debtors may also have a cross-claim available where the creditor owes the debtor money. If a creditor have mutual debts with the debtor where they owe the debtor money, it may be possible to set off the creditors claim to balance that debt.

Debt recovery is a balancing act in order to avoid “throwing good money after bad”. On the other hand, debtors can still protect themselves and their assets by negotiating and finding a compromise with the creditors whilst meeting their legal obligations.

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