WHAT IS AN OVERDUE DEBT?

A debt is a creditor’s right to be paid by a debtor. A debt becomes an overdue debt once it is due and outstanding, provided that it is certain, liquidated, due and payable. Once a debt is overdue, the creditor can collect it, either personally or through an agent.

WHEN SHOULD YOUR OVERDUE DEBT BE COLLECTED?

A debt is overdue as soon as payment is late

A debt is overdue as soon as payment is late. It must be remembered that once payment is late, even by as little as a single day, the law considers the debt to be overdue. The debtor is in breach, because he failed to fulfil his obligation by the deadline.

Once there has been a delay in payment, a debt is already overdue

A debt that is not paid when due becomes an overdue debt the following day.There is no difference in kind between late payment and an overdue debt. Late payment is a kind of overdue debt. But if one reacts quickly, a late payment can become a trivial incident that is swiftly remedied, whereas the longer one waits, the greater the likelihood that the overdue debt will not be paid. By viewing a failure to pay by the deadline as a “late payment”, one is taking a positive approach to the problem (I wasn’t paid today. but I will be paid later). By viewing a failure to pay by the deadline as an “overdue debt”, one is taking a prudent approach to the problem (I wasn’t paid today. which means that I won’t ever be paid, or that I am running that risk).A debt that is not paid when due becomes an overdue debt the following day.There is no difference in kind between late payment and an overdue debt. Late payment is a kind of overdue debt. But if one reacts quickly, a late payment can become a trivial incident that is swiftly remedied, whereas the longer one waits, the greater the likelihood that the overdue debt will not be paid. By viewing a failure to pay by the deadline as a “late payment”, one is taking a positive approach to the problem (I wasn’t paid today. but I will be paid later). By viewing a failure to pay by the deadline as an “overdue debt”, one is taking a prudent approach to the problem (I wasn’t paid today. which means that I won’t ever be paid, or that I am running that risk).

The practice of delaying payment, already widespread among businesses, is now subject to mandatory penalties.

The practice of delaying payment is now subject to mandatory penalties. Any business that does not receive payment on the agreed date has an obligation to charge late payment interest. Interest starts to accrue on the day following the due date appearing on the invoice, without the business creditor having to send a reminder or make a formal demand for payment. Creditors must not be shy-they must demand that the debtor pay them the penalties.

An overdue debt can be collected provided it is certain, liquidated, due and payable .

Before collecting an overdue debt, a creditor must ascertain that it is certain, liquidated, due and payable.

A debt must be certain

Before starting the collection process, a creditor must ascertain that the debt is certain, meaning that it actually exists and cannot be disputed .
This point is key in dealing with debts that arise under a contract. A contract is formed where there is a meeting of the minds. But the two minds are not always equally matched, and contracting parties who enter into an agreement under duress or because they failed to accurately assess the scope of their liabilities have the right to ask that the contract be cancelled. Thus, when an individual signs a purchase contract offered to him at his home, he has seven days to cancel the agreement: the legislature, in its wisdom, felt that a person who is solicited, without any action on his part, can be talked into signing a contract placed before him. Accordingly, if the individual is not told that he has seven days to cancel the contract, the contract will automatically be null and void.The creditor has the burden of proving that the debt is certain. He can meet that burden with documents that formalise the parties’ agreement, and sometimes by giving oral testimony, and by means of informal documents or records as well.Where the debt cannot seriously be disputed, and provided that it satisfies certain conditions, a creditor can use one of two highly effective, streamlined legal procedures to secure payment and lodge an application for a payment order, or an expedited claim for interim relief .Where either the existence or the amount of the debt can be disputed, the creditor must issue legal proceedings aimed at securing recognition of the fact that the debt actually exists, before he can collect it. In that case, a full-fledged action for recovery of a debt must be brought.

The debt must be liquidated

In order to be collected, a debt must also be liquidated, which means that the amount must be determined, or the document evidencing the debt must contain all the information needed to determine it.Where a debt is not liquidated, for example, where damages are sought for a loss that has not yet been appraised, a creditor may not demand payment without first having the amount of the debt determined (notably by means of an expert appraisal).

The debt must be due and payable

A debt is not due and payable if it is subject to a condition precedent that has not yet been satisfied.

Finally, before it can be collected, a debt must be due and payable, which means that it must be due now. If payment is subject to a condition, and the condition has not yet been satisfied, the debt is not due and payable and the creditor cannot yet go ahead and collect it.Where a person buying a house signs a preliminary agreement, the agreement generally contains a condition precedent providing that the buyer will not have to buy the house and pay the agreed price unless he gets the bank loan he needs to finance the purchase. The purchase hinges on the bank’s response, and until the bank has responded, the debt owed to the seller is not due and payable. As a result, the seller cannot go ahead and collect the debt, which is not yet due, from the presumed purchaser. If the bank refuses to make the loan, the buyer is under no obligation to buy the house, and the seller will no longer have any claim against him. The debt will only become due and payable if the bank approves the loan to buy the house

A debt is no longer due and payable if it has disappeared upon the occurrence of a condition subsequent.

The debt may be rescinded automatically if the parties agreed in advance on this contingency, failing which, it may be cancelled by applying to a court.When two people agree in a contract of sale that the sale will be rescinded (meaning, cancelled) if the buyer does not pick up the merchandise within one month, and the buyer fails to pick up the merchandise within that period, the sale is cancelled, and the seller cannot of course demand payment.

A debt is due and payable on a fixed, future date, or on successive dates

A contract of sale is a typical example of an agreement for payment of a debt on a fixed, future date. The merchandise must be delivered on t-1, and payment must be made on
t-2.A contract with the electric utility is an example of an agreement in which payment is due on successive dates: an individual must pay for the electricity he uses every two months. There is no pre-arranged date on which the agreement expires. .These two types of contract often provide for acceleration (meaning that payment will be due) if a single payment is not made within a given period of time after the date it was due.