When a debt from a loan or credit line cannot be repaid in full or in part, it is classified as bad debt. The need to recover debt also arises when the business that is owed to pay back debt can no longer do so. There are numerous ways to collect a debt, some of which are categorized as legal and others as illegal. Calling the client to resolve the issue amicably or using commission-based debt collectors are two non-legal ways to recover the debt.
Legal techniques for collecting debts include:
1) Civil Remedy: A party who has been wronged may send the debtor a legal notice to begin a civil lawsuit for unpaid debts.
2) Criminal Remedy: When the issue is serious, the offended party may file an FIR at the local police station with jurisdiction over the subject. After the FIR is filed, a criminal case must be launched, and the legal process will then begin.
3) Out-of-Court Settlements: In this category, the harmed party can settle the conflict and obtain compensation through mediation, arbitration, or negotiation.
Laws for Recovering Debt
In India, recovering money or debt can be a difficult undertaking. Choosing which law to apply can be difficult due to the multiplicity of laws in existence. The following laws are applicable for money recovery under Indian jurisdiction:
1) Indian Contract Act, 1872
2) Negotiable Instruments Act, 1881
3) Code of Civil Procedure, 1908
4) India Penal Code
5) Insolvency and Bankruptcy Code, 1905
6) RDDBFI Act, 1993
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