Debt Recovery

Debt recovery is the legal process of collecting unpaid debts — money that is owed by one party to another under a contract, a loan agreement, an invoice, or another obligation. In Kenya, debt recovery is governed by the Civil Procedure Act, the Civil Procedure Rules, 2010, and where the debtor is insolvent, the Insolvency Act, 2015. The process ranges from informal demand letters to formal court proceedings and execution of decrees, and the choice of method depends on the amount of the debt, the financial position of the debtor, and the cost-effectiveness of the recovery action.

This service begins with an assessment of the debt and the debtor. Advocates review the underlying documentation — the contract, the invoice, the delivery note, the acknowledgment of debt — to confirm that the debt is due, that the amount is correct, and that the creditor has the legal right to recover it. Advocates assess the debtor's financial position — whether they are solvent, whether they have attachable assets, and whether they are likely to dispute the claim. Based on this assessment, they recommend the most cost-effective recovery strategy.

The first step is usually a demand letter — a formal written demand for payment, sent on their letterhead, which sets out the amount owed, the legal basis for the claim, and a deadline for payment. In many cases, a demand letter from a law firm is sufficient to prompt payment, particularly where the debtor was simply delaying rather than disputing the debt. Advocates follow up the demand letter with telephone calls and meetings where appropriate, and they negotiate payment plans where the debtor is unable to pay the full amount immediately.

If the demand letter does not produce payment, they proceed to court action. For debts under KES 1,000,000, they file a claim in the Small Claims Court, which is designed to be fast and informal, with proceedings typically completed within 60 days. For larger debts, they file a plaint in the Magistrates' Court or the High Court, depending on the monetary jurisdiction. Advocates handle the entire court process — pleadings, interlocutory applications, trial, and judgment — with the objective of obtaining a judgment for the debt, interest, and costs as quickly as possible.

After judgment, they proceed to execution. Advocates assess the debtor's assets and select the most effective execution method: an attachment and sale of the debtor's movable property through a court broker; a garnishee order against the debtor's bank account; a charging order against the debtor's immovable property; an attachment of earnings; or, where the debtor is a company, a winding-up petition. Advocates handle the entire execution process, from the application for the warrant to the actual recovery of funds.

Where the debtor is insolvent — unable to pay their debts as they fall due — they advise on the use of insolvency proceedings. Advocates file statutory demands under the Insolvency Act, they present winding-up petitions against corporate debtors, and they file bankruptcy petitions against individual debtors. Advocates also act for creditors in insolvency proceedings, submitting proofs of debt, participating in creditors' meetings, and pursuing the recovery of assets that have been fraudulently transferred or concealed.