ALL YOU NEED TO KNOW ABOUT DEBT RECOVERY IN KENYA
Debt recovery is essential for maintaining financial stability for businesses and individuals. Whether the debt arises from unpaid loans, commercial transactions, or contractual obligations, it significantly disrupts your cash flow.
Navigating the recovery process in Kenya requires a clear understanding of the legal framework governing debt collection which framework includes court procedures, enforcement mechanisms, and even alternative dispute resolution options. This article explores all you need to know about debt collection in Kenya.
How are debt collection proceedings commenced in Kenya?
Normally, the first step is issuing of a time-bound demand letter to the debtor. This serves as a formal notice demanding performance or payment of the sum of money owed in honour of a contractual commitment within a definite period.
What is the significance a demand letter?
A formal demand serves as a preventive measure against incurring additional costs of suit should the claim be admitted. Issuing a Demand Letter further mitigates against filing vexatious or rather suits brought out of malice.
Where a formal demand is ignored, then the next available option is institution of debt recovery proceedings against a debtor.
What are the formal forums for filing a debt recovery proceedings?
This is greatly influenced by the amount claimed and/or owed. Accordingly, Section 12(3) of the Small Claims Court Act limits jurisdiction of the Court to one million Kenyan Shillings. Further, as per Section 7 of the Magistrates’ Court Act, Magistrate Courts have and exercise jurisdiction and powers over cases in which the value of the subject matter does not exceed Twenty Million Kenyan Shillings. By virtue of Article 165(3) of the Constitution, the High Court is the appropriate forum for matters exceeding Twenty Million Kenyan Shillings.
Who is a Judgement Debtor?
A judgement debtor is person whom a judgement has been entered against by a Court of Law.
Who is a Decree Holder?
A Decree Holder is the person whom a judgement has been rendered in favour of in civil proceedings.
What is the time limitation for filing debt recovery Proceedings?
Given that almost all debt recovery proceedings emanate from either Oral or Written Agreements, they ought be filed reasonably within Six (6) years. This is in accordance to Section 4 of the Limitation of Actions Act.
When is time for Filing Debt Recovery Proceedings extended?
The limitation of time may be extended by virtue of Section 22, 26 & 27 of the Limitation of Actions Act. The aforementioned sections allow extension of time as result of disability, Fraud, Mistake and Ignorance of Material Facts.
Remedies against a judgement debtor who is unwilling and/or remains reluctant to payment after judgement.
In the aforementioned circumstance, a decree holder may pursue the below options:
i. Garnishee Proceedings- This is as per Order 23 of the Civil Procedure Rules which enables a decree holder to reach and secure money due to the judgment debtor, which held lawfully by a third party through attachment of debts. A case in point is attachment of Judgement Debtor’s Money held by a Bank in his account.
ii. Also, Section 38 of the Civil Procedure Act provides that the Court has power to enforce execution on application of a decree holder. Accordingly, the Court may order execution of a decree-
• by delivery of any property specifically decreed;
• by attachment and sale, or by sale without attachment, of any property;
• by attachment of debts;
• by arrest and detention in prison of any person;
• by appointing a receiver; or
• in such other manner as the nature of the relief granted may require.
What is the legal recourse where a debtor wants to delay and/or obstruct the Court process before judgement?
The most appropriate approach is to make an interlocutory application seeking arrest and attachment. This ensures the defendant is called upon to furnish security for his appearance as provided under Order 39 of the Civil Procedure Rules.
Importantly, the Defendant cannot be arrested if he settles any sum specified in the warrant as sufficient to satisfy the plaintiff’s claim. The amount paid is normally held in deposit by the Court until the suit is disposed of or until further Court order is issued.
Can a judgement be settled in Installments?
Absolutely! Order 21 Rule 12 of the Civil Procedure Rules allows for direct payment in Installments where Decree has been issued for Payment of money.
At Musa & Musa Advocates, we guide our clients through the whole process-from issuing demand notices and structuring repayment arrangements to navigating court procedures and enforcement. This ensures that every step is taken with precision, professionalism, and a clear focus on achieving efficient and legally sound outcomes.
For a meticulous and a seamless debt recovery process, find the best debt recovery lawyers in Nairobi and Kenya at large at Musa & Musa Advocates. We take great pride and celebrate years of immense success in matters debt recovery and settlement of debts.