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Lawyers for Debt Recovery in India

Debt collection or debt recovery are similar terms with a thin line between them, which is who is trying to retrieve the edit.

Debt collection is a creditor’s attempt to recover consumer credit and loans which have not been paid back by a customer. Debt recovery is when a loan, for example, a credit card balance continues to get unpaid, and a creditor hires a third party, termed as a collection service, to focus on collecting the unpaid money.

Debt recovery is important because it is directly correlated to our credit score. If we are being contacted by a debt recovery service, it means there is a record that we have defaulted on a loan and currently have delinquencies. These delinquencies get immediately reported to the credit bureaus, damaging our credit score, which can potentially or intentionally hurt any future loan opportunities.

There are several ways in the debt recovery process and it is crucial to know what to expect when you are contacted by a debt recovery agent. Because financial debt can be a sticky situation, legislation has been situated to guide the debt recovery process and ensure that consumers are protected from getting harassed debt recovery practices.

Debt Recovery Terminology

  1. Debtor: person obligated to pay back money that was borrowed

  2. Creditor: person who extends credit with an agreement that the money loaned will be paid back

  3. Third-party collector: person or service that is contracted to collect debts for a credit

Debt Recovery Laws

Recovery of Debts Due to Banks and Financial Institutions shortly RDDBFI Act, 1993 is an Act to provide the reason for the establishment of Tribunals for expeditious adjudication and recovering of debts due to Banks and Financial Institutions and for matters connected or involved therewith or incidental thereto.

Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest shortly SARFAESI Act, 2002 is an Act to regulate securitization and reconstruction process and ideas of financial assets and enforcement of security interest and for matters connected or involved therewith or incidental thereto.

Debts Recovery Tribunals and Debts Recovery Appellate Tribunals

The Debts Recovery Tribunals in short DRTs and Debts Recovery Appellate Tribunals DRATs were situated under the Recovery of Debts Due to Banks and Financial Institutions Act shortly RDDBFI Act, 1993 with the specific objective or motive of providing expeditious adjudication and recovering of debts due to Banks and Financial Institution.

Currently, 39 Debts Recovery Tribunals (DRTs) and 5 Debts Recovery Appellate Tribunals (DRATs) are functioning across India. Each DRT and DRAT is supervised by a Presiding Officer and a Chairperson, respectively. The post of Presiding Officer is equivalent to a District Judge, while that of the Chairperson is equivalent to a High Court Judge.

The Debt Collection Process

The debt collection process exactly starts when there is a missed payment on a credit card or any kind of loan. The debtor has perfectly 30 days from the bill due date ( Note: not the billing date) to clear the payment before it is reported to the esteemed credit bureaus. During this time, the creditor will try contacting the debtor via phone, email or letter to get done with their payment and any late fees. It’s best to make clear of the debt during this 30-day window. The debtor can explain his/her particular situation and set up a repayment plan if permitted.

After exactly 30 days, the debt collection is handed off to another department at the same company that specializes in retrieving delinquent debt. This won’t be a collection agency, it would be just a department within the lending company. They could report the person’s delinquency to a credit bureau and shut down his\her credit card account.

After 180 days, the creditor usually has to contract the debt or write it off their books and sell it to a debt collection agency. the debtor must be aware that the creditor might contract or sell the debt at any time before the 180 days, so it’s best to act as sooner as possible 

Debt Recovery Process

Once the debt belongs to a collection agency, the creditor will have sent the claim information with supporting documentation to the debt collector noting the person’s failure to pay according to the terms and conditions of the agreement. After the claim is reviewed, checked, and accepted by the debt collection service, the recovery process begins with a demand letter being sent to the debtor and an acknowledgment letter being sent to the client (creditor who had enlisted the collection service).

The active account and the debt recovery efforts involve the following:
  1. Telephone contact begins in an attempt to look for payments for the outstanding balance and ensure that the payments are realized.
  2. If the debtor by any chance does not cooperate with resolving the failed debt, the debt collection service immediately updates the client with details on forwarding the claim to the affiliated attorneys.
  3. Forwarded claim is attested or signed by the client and sent to the mentioned attorneys, and if attorneys recommend legal action, case requirements are provided.
  4. If the client authorizes the legal action or the case and agrees upon case requirements, the lawsuit is prepared and filed in the mentioned court. If the client doesn’t want to pursue legal action, the claim is worked on for more than 60 days by the debt collection service and then gets closed.
  5. The complaint is eventually served. If the debtor files a response, the discovery process begins and a trial date is fixed.  If the debtor does not respond somehow, a default judgment is filed by the attorneys affiliated with the case.
  6. If a judgment is marked in the client’s favor, attorneys will file a Writ of Attachment, attempt to locate e debtor’s assets, and production steps to satisfy the judgment (bank levies, garnishments, liens, etc.).

What to Do When a Debt Collector Sues?

If the person had served a debt collection lawsuit and summoned to court. The best advice is Don’t ignore the problem!  If failed to respond or show up in court, the judge will grant a default judgment against the person.

In most cases, it happens that there is a settlement conference or sometimes arbitration before the trial. This gives the person and the debt collection agency a golden opportunity to reach an agreement and avoid a trial and even the legal fees that will go along with it. The debt collector could pursue a summary judgment if no points of the facts are disputed, and wins without a trial. Most cases generally get settled or end in a summary judgment.

If the case moves on up to the trial, the person should have a consumer lawyer representing him in the court. The case proceeds like a very normal trial. Both parties present their side of the facts, and the judge decides according to him.

If a debt collector receives a judgment against the victim, they are entitled to give the amount which he failed to pay and can also use alternative debt collection techniques or methods. They can also garnish wages, seize valuable property, and place a bank levy which is freezing the account or a lien on the person’s home, guaranteeing them to offer a portion of the money on the sale of the property.