It is Christmas and celebration is in the air. It is a season of joy and spiritual blessings. There will be lots of travels, religious worship, and communal social functions. In a few days too, the world will be ushering in a brand new year –the year 2018.
Interestingly, celebrations such as these may also put financial pressure on all who in one way or the other cater for the needs and expectations of subordinates and dependents. It is the season when invitations to a myriad of social engagements demand that you make financial contributions that will be ‘’thankfully received.’’ Except you are financially discipline, you may just find yourself acquiring one form of debt or another to meet these expectations.
According to researchers, Cecchetti, Mohanty and Zampolli, ‘’Debt is a two-edged sword. Used wisely and in moderation, it clearly improves welfare. But, when it is used imprudently and in excess, the result can be disaster…. ‘’
There is strong advice that people avoid consumer debts as much as practicable. Since these are not investments that will generate returns, the temporary relief that the debt provides could just be postponing the evil day. Debt recovery is often not a pleasant experience for both debtor and creditor. When the chips are down, even a polite call from a debt collector could ruin your day. In one horror story of debt recovery, a debt collector, hired by a funeral home, threatened to dig up the body of the debtor’s daughter.
According to America’s national debt relief agency ‘’Many borrow money, hoping for some respite from the financial stress. Any such respite is temporary. Eventually the debt piles up and you are in a deeper hole than you ever imagined you would be. Living in denial and ignoring the reality of your financial situation magnifies the problem, pulling you deeper and deeper into debt. Consumers typically only become aware of a serious problem with debt once it has already grown beyond the scope of a simple fix’’
Recent advancement in dispute resolution however suggests that a more efficient way of debt recovery could be through the mediation process. This is because the several hundreds of debt recovery cases in courtrooms may actually be testimonials to relationships gone sour. Before filing the lawsuit, a creditor is expected to issue a letter of demand to the debtor. This is the point at which some get it all wrong. The letter of demand should be nothing but a clearly worded letter of formal request, asking the debtor to pay up the debt as evinced in the transaction. However, in order to impress their clients, some debt collecting lawyers’ issue demand letters that threaten to deal with the debtor if within a specified time the debt remains unpaid. This bravado is unproductive and may expose the writer to ridicule. Whenever a creditor kicks off on this note, three things are likely to happen: the debtor goes underground, become elusive or provocatively dares the creditor to go to court.
A discerning creditor should resist the lure of court action. Referral to mediation as first option does not in any way preclude him from going to court should the process fail. The advantage of mediation is that the process will enable the debtor to explain his financial position and to give assurances of what further efforts he will make to repay the loan. Such face to face re-engagement usually signifies a cessation to any ongoing hostilities and mutual suspicion. A competent mediator will not fail to explore prior relationships of the parties in the resolution of the dispute. He will also want to know what earlier efforts had been made to recover the debt and why these have failed.
When trouble begins in debt recovery, it is not usually because the debtor will be unable to pay, but that his body language gives no hope of intention to repay the debt. Believe it or not, creditors dread going to court as much as the debtor because it will involve court costs, legal fees and time investment. At mediation which is both confidential and fast paced, there are two likely scenarios that will emerge. The first is that the debtor may negotiate repayment of a lump sum on an agreed later date or opt for a lower monthly repayment schedule. A quick consultation with the creditor’s mediation advocate should point a better way forward for him.
What a successful mediation does is that it takes off the uncertainties of a court trial which a creditor stands the risk of losing if he does not show sufficient proof as demanded by strict procedural requirements. There is also the possibility of getting stuck in a technical jigsaw such as his legal right to demand an interest on a loan when he is not a licensed money lender.