What is the Demand Stage?

When a creditor is owed a debt, their interest is in being paid. There are straightforward legal procedures to collect a debt in Kenya.

The first step is for the lawyer to do a demand letter giving the debtor a number of days to pay the debt. The debtor may be an individual or a company.

During the period within which the debtor is directed to comply with the demand (and which is written in the demand letter), the debtor can present a proposal on how they intend to pay the debt. The aim is to come to a settlement without the need to go to court and such a proposal for settlement must be acceptable to the creditor.

It is advisable for the creditor to be prompt in their attempt to collect a debt as in most cases, the longer a debt is outstanding, the likelihood of it being paid reduces for diverse reasons such as: inclination of the debtor to pay may diminish as time goes by; or their financial means of repaying the debt may be dwindling the more time goes by; or the debtor’s list of creditors may grow if they have several debts they are juggling to pay. It is also important because such claims have a limitation period within which they should be filed in Kenya as set out in the Limitations of Actions Act in Kenya. Claims filed out of time can be dismissed for being out of the statutory period for when they ought to have been filed.

The debt may arise under various circumstances, for instance a loan agreement or from breach of a contract for the supply of goods or services under which the debtor was to make payment to the supplier of said goods and services.

What is the Settlement Stage (which both the creditor and debtor must agree to)?

If parties come to an agreement to settle the debt out of court, the lawyer can draw up a settlement agreement. The settlement agreement sets out the terms of paying the money owed to the creditor such as the instalment or lump sum amount; the time within which it should be paid and how costs of the creditor may be settled if the debtor should fail to comply with the settlement agreement. Once this agreement is signed by both parties it is binding.

The settlement agreement is also useful to apply for judgement on admission should the debtor subsequently fail to comply with the terms of the settlement.

If the debtor complies with the negotiated terms of the settlement and fully pays their debt, then the matter can end there.

What is the Suing in Civil Court Stage?

Where the debtor fails to pay up even after service of the demand letter or parties are unable to agree on how the debt should be settled, then a suit can be filed in court. Claims will be filed in the court of appropriate jurisdiction depending on the amount of money owed. The plaint is a court document that sets out the circumstances under which the claim came about including breach of the contract that has led to the debt. The claim seeks for an order confirming the amount owed, payment of the money owed and interest and costs in the case.

In a successful claim and upon obtaining the relevant enforcement order, the judgement debtor can attach assets of the debtor in order to satisfy the claim.

It is notable that debts are civil claims in Kenya

It is also notable that the court after hearing a claim and issuing a judgement in the creditor’s favour is the entity with power to legally mandate the payment of a debt via enforcement orders.

What is the Timeline to Collect a Debt in Kenya through the Courts?

The timeline to collect a debt varies widely. If the debtor agrees to pay the debt and sticks to a payment schedule the debt will be collected faster.

With respect to cases it can take some time for a case to go through the court system as some courts will process the claim faster than others and this is entirely dependent on extraneous factors often beyond any single parties control e.g. court calendar, number of adjournments, number of parties in the case, interim applications filed by parties etc. Thus a case can move swiftly or relatively slowly.

Conclusion

Therefore, Kenya has a reliable procedure for a creditor to get paid when owed by a debtor or otherwise as pertains to a breach of contract for supply of goods or services