Introduction
Debt recovery is a sensitive but necessary aspect of doing business or managing financial relationships. When a debtor defaults on payment, creditors must find ways to recover their money while staying within the boundaries of the law.
In Nigeria, there are laid-down legal procedures for recovering debts. Failure to follow these processes can expose a creditor to lawsuits for harassment, defamation, or even criminal charges.
This article explains how to handle debt recovery legally and professionally in Nigeria.
Understanding Debt Recovery in Nigeria
Debt recovery refers to the process of pursuing payment from an individual or entity who owes a legally enforceable debt. It could arise from unpaid loans, services rendered, goods sold, tenancy arrears, or any other financial obligation.
Common Mistakes Creditors Make During Debt Recovery
Before going into the legal steps, it’s important to highlight what not to do:
Harassment or Threats:Using physical force, threats, or abusive language is illegal and can amount to criminal intimidation.
Embarrassment:Publicly shaming a debtor on social media or in their workplace can lead to defamation claims.
Seizing property without court order:Self-help measures like forcefully entering a debtor’s premises to seize goods are unlawful in Nigeria.
Involving the police in purely civil debt matters: Except where criminal conduct like fraud is involved, using the police for civil debt recovery is abuse of process.
Legal Methods of Debt Recovery
If informal methods (such as polite demand letters or negotiation) fail, here are the proper legal steps to take:
1. Issuing a Formal Demand Letter
The first legal step is to send a demand letter to the debtor, clearly stating:
1. The nature and amount of the debt
2. The due date
3. Any prior reminders sent
4. A specific deadline for payment (typically 7–14 days)
5. Notice of further legal action if payment is not made
(The demand letter should be written by a lawyer to show seriousness and professionalism).
2. Negotiation and Alternative Dispute Resolution (ADR)
Before litigation, consider exploring amicable solutions like:
Negotiation: A payment plan or restructuring agreement
Mediation: Involving a neutral third party to facilitate settlement
Arbitration: If the original contract has an arbitration clause
(ADR can save time and cost compared to full litigation).
3. Filing a Debt Recovery Action in Court
If all else fails, you can sue the debtor in a competent court. The choice of court depends on the amount involved.
(Your lawyer will file a writ of summons, statement of claim, and any necessary affidavits).
4. Obtaining a Judgment
After hearing both sides, the court will issue a judgment. If the debtor still fails to pay after judgment, you can initiate enforcement proceedings.
5. Enforcing the Judgment
Legal enforcement options include:
1. Writ of Execution:Authorizing seizure and sale of the debtor’s assets
2. Garnishee Proceedings: Freezing funds in the debtor’s bank account
3. Writ of Attachment:Placing a lien on the debtor’s property
4. Judgment Summons:A form of civil contempt proceeding where the judgment debtor is summoned to appear in court to explain why they have not paid the judgment debt. If the court finds that the debtor has the means to pay but has willfully refused, it may order imprisonment until payment is made or for a fixed term.
5. Bankruptcy proceedings (for individuals) or Winding-up proceedings (for companies):If the debt remains unpaid and is substantial, you may initiate insolvency proceedings to declare the debtor bankrupt (for individuals) or wind up the company, thereby liquidating its assets.
(These are formal court-supervised processes to recover your money).
Can You Involve the Police?
This is a common question among creditors, especially when frustration sets in due to non-payment.
The answer is clear: the police should not be involved in civil debt recovery.
According to the Court of Appeal in OKAFOR & ANOR v. AIG POLICE ZONE II ONIKAN & ORS (2019) LPELR-46505(CA), the law is settled:
“The primary duty of the Police by Section 4 of the Police Act is the prevention of crime, investigation and detection of crime and the prosecution of offenders: IBIYEYE vs. GOLD (2012) ALL FWLR (PT 659) 1074. The Police is not a debt recovery agency and has no business to dabble into contractual disputes between parties arising from purely civil transactions. See MCLAREN vs. JENNINGS (2003) FWLR (PT 154) 528. By all odds, the law is that a person who merely makes a report of a criminal infraction to the Police cannot be held accountable for the actions taken by the Police except where he was instrumental to and actively instigated their actions over and beyond mere lodging of a formal report of a criminal infraction. That is however not to say that when, as in the circumstances of this action, a purely civil matter is reported to the Police, such a person cannot go scot-free as the report ought not to have been made at all since it is not within the purview of Police duties. It is a report made malafide and he will be equally liable for the action taken by the Police irrespective of whether he actively instigated them or not, since he had no business involving the Police in a purely civil matter in the first place. Such conduct which portrays disregard of the law and is aimed at using the coercive powers of the State to punish a contracting party in a purely civil matter ought to be mulcted in exemplary damages.”
— Per UGOCHUKWU ANTHONY OGAKWU, JCA (Pp 32 – 33 Paras E – F)
In essence, if you involve the police in a purely civil debt dispute, you could be liable for exemplary damages.
Unless the debt involves elements of fraud, obtaining by false pretenses, or criminal breach of trust, do not report the matter to the police.
Instead, use legal means such as demand letters, civil suits, mediation, or court enforcement procedures.
Best Practices for Creditors
To avoid bad debts in the first place:
1. Conduct credit checks before extending large credit
2. Use written contracts with clear repayment terms
3. Include dispute resolution clauses in your agreements
4. Keep detailed records of all transactions and communications
Conclusion
Debt recovery can be frustrating, but it is important to remain professional and strictly follow legal procedures. Engaging a lawyer with experience in debt recovery will help you avoid pitfalls and increase your chances of success.
Disclaimer:
This blog post is for general informational purposes only and does not constitute legal advice. Readers are advised to consult a qualified legal practitioner for professional guidance based on specific facts and circumstances.
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