Considerations for Debt Recovery in Malaysia

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Someone owes you money and you are planning to recover the money from them? Below are some factors that you should consider before you pursue your claim.

Do you know who your debtor is?

Identifying your debtor should be one of the first things that come to your mind- it could be an individual or a company.

Why? Simply put:

You will want to ensure you are putting in the right legal paperwork in court to prevent your claim from being thrown out by the court;
Assuming your claim is allowed, you will also need to put in the proper enforcement papers in court against your debtor to ensure you are able to collect your debt in an efficient manner;
If you sue the wrong party, chances are you will be wasting more time and expenses just to rectify your mistakes.

Is it worth your time?

Is your debtor overflowing with cash, or is your debtor cash-strapped to the point where he is staring bankruptcy in the face? You will have to keep this in mind when you are planning to recover your debt- it would be a waste of time and energy if you were to pursue your claim all the way only to subsequently find out that you won’t be able to recoup a single penny from your debtor.

Depending on who is your debtor, here are some things you can do to make your life easier:

If your debtor is an individual, conduct a bankruptcy search with the Malaysian Insolvency Department/ Jabatan Insolvency Malaysia to ascertain whether that individual is bankrupt; or
If your debtor is a company, conduct a search with the Companies Commission of Malaysia/ Suruhanjaya Syarikat Malaysia to ascertain the financial standing of the company i.e. whether the company is wound-up.

Can you still pursue your claim?

What we mean is this- under the law, there is actually a window when you can actually pursue your claim. Once that window is closed, you will not be able to pursue your claim any longer.

In law, we call this the “limitation period”. Under the law, you will have a period of 6 years from when the debtor legally owes you the debt to pursue your debt. The reason for this is twofold- it ensures that you stop procrastinating and get on with your claim, and also ensures that your debtor is not put in a place where he has to wait in perpetuity for you to sue him.

Having said that, if your debtor (within that 6-year period) acknowledges the debt either expressly, via writing, or pays you back a portion of the debt, the 6-year period will reset and you will have another 6 years (from when your debtor acknowledges the debt) to recover your debt.

Do you have evidence to back up your claim?

Are you able to present your case before a judge i.e. do you have the necessary evidence to present your case before a judge? Ultimately, it is your responsibility to present your case and paint it as complete as possible to convince the court that your claim is a legitimate claim.

So what you will need? Here is some guidance:

Did you and your debtor enter into an agreement/ contract? If yes, does the contract stipulate when is the debt due?
Are there correspondences (be it physical correspondences, or even WhatsApp messages, as established in one of our earlier articles) between you and the debtor in which you hounded him for the debt that is due to you?
Are there invoices/ receipts to show that your debtor owes you money?
Did you issue any letter of demand to your debtor? This is in a way to nicely notify your debtor to cough up money he owes you unless he wants to land himself in court for his refusal to pay.

Do you know how much your debtor owes you?

While there is no specific amount that the debtor has to owe you before you can attempt to recover your debt, it is prudent to know how much he owes you as this will determine which court you file your claim as your claim can potentially be struck out if you file it in the wrong court. If that were to happen, you would definitely incur more costs to refile your claim.

Below is a quick guide on which court you should file your claim:

Anything that is RM5,000.00 and below- file it in the Magistrate Court/ Small Claims Court (check out our previous article in regards to small claims court).
Anything that is RM100,000.00 and below- file it in the Magistrate Court.
Anything that is RM1 million and below- file it in the Sessions Court.
Anything that is above RM1 million- file it in the High Court.

And there you have it. Hopefully, you learn something new today!!

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