Debt Collection in Saudi Arabia: Types, Practices, and More

Debt collection companies are specialized companies that can help creditors collect their debts. Some companies may get into debt problems due to bad management decisions, such as over-expansion or investing in risky projects. Some companies may get into debt problems due to fraud, such as embezzlement or takeover. On assets, these problems have bad consequences, as debt payments can erode a company’s profits, making it less profitable, and thus it is difficult for the company to raise cash, which may lead to liquidity problems, if the company is unable to pay its debts, may have to declare bankruptcy which causes debt for companies

In this article, we will talk about debt collection in Saudi Arabia, in addition to other details, so stay tuned…………..

Debt Collection

Debt collection in the Kingdom is the process of recovering debts owed to individuals or companies. It is a complex process governed by a number of laws and regulations. The debt is collected in exchange for a percentage of the amount. There are several ways to collect debts,Like negotiation Direct contact with the debtor, file a lawsuit against the debtor, or contract with a company to collect the debt, as the debtor does this in order to obtain his money if the agreed-upon date is postponed.

Parties to the debt collection process

• Creditor: The person or company owed the debt, who is responsible for contacting the debtor and attempting to collect the debt directly.
• Debtor: The person or company that owes the debt and is responsible for paying the debt to the creditor.
• Debt Collection Company: A company that specializes in collecting debts on behalf of creditors, using a variety of methods to collect debts, including contacting the debtor directly, sending letters and emails to the debtor, or visiting the debtor in person.

Types of debt

Debts in the Kingdom are divided into:

• Bad debts: These are debts that are difficult to obtain, for example: debts whose owners have gone and their specific whereabouts are unknown, or who died and the estate was not sufficient to pay off the debt.
• Debts whose collection is doubtful: These are debts in which there are some possibilities that indicate the debtor’s inability to pay on time.Like being late In paymentDebt For example, procrastination.
• Good debts: These are debts in which the debtor has a high financial position, and it is unlikely that he will be unable to repay.

Debt collection methods

Negotiating directly with the debtor is often the first step in debt collection. Creditors should attempt to contact the debtor directly and negotiate a repayment plan. If the debtor is willing to cooperate, this may be the most efficient and cost-effective way to collect the debt, but there are many ways to collect the debt.

1. Collection by amicable means (friendly settlement)

Debt collection through amicable settlement is the process of settling debts between the debtor and the receivable (creditor) without resorting to court or other legal procedures. This process can be effective for resolving financial disputes quickly and at a low cost.

It is also one of the best methods because it preserves the relations between the two parties, “the creditor and the debtor,” in addition to preserving the interest that unites them, and saving them a lot of time and cost.

Friendly settlement procedures

Here are some steps that can be taken to collect debts through amicable settlement:

1. Communicating with the debtor: You must contact the debtor directly and explain to him the amount owed and the reason for the debt, as this stage is an opportunity to understand the debtor’s position and help him search for a solution.
2. Negotiation: After initial communication with the debtor, you can begin negotiating arrangements for repaying the debt. These arrangements include installments of the due amount in regular payments or reducing part of the amount.
3. Written agreement: If an agreement is reached with the debtor regarding payment arrangements, a written agreement must be concluded that clearly specifies the terms of the agreement, and also includes an agreement on the amount due and the timetable.to pay And any additional terms.
4. Implementation: Once a written agreement is reached, the debtor must implement the arrangements as agreed upon, and the debtor must make payments according to the agreed-upon schedule.
5. Follow up on commitment: Commitment to the agreement must be followed up by both sides, and if any delay or default in payment occurs, we must communicate with the debtor and talk about the issues that may be the cause of this.
6. Retention of documents: All documents relevant to the amicable settlement process must be kept, including the written agreement and any correspondence between the parties.

2. Collection through judicial methods (judicial settlement)

Judicial settlement is a debt collection procedure that is applied to the debtor if he stops paying his debts, whether the debtor is a merchant or a legal entity. Judicial settlement aims to protect the merchant who has good intentions but is unlucky, that is, he does not intend to delay the debt.

It is resorted to protect the merchant so that his bankruptcy does not appear, as an agreement is concluded with the creditors under the supervision of the judiciary, in which the majority opinion is taken into account.and the occurrence This settlement and reconciliation avoids ruling the merchant bankrupt, and so that the commercial project is preserved

Judicial settlement procedures

• If the two parties are unable to reach a solution between themselves, they will resort to the judiciary and file a financial claim.
• Both parties must abide by the ruling issued by the court.

Terms of judicial settlement

The conditions for a judicial settlement are divided into substantive and formal conditions. The substantive conditions include:

• The debtor must have the status of a merchant, as judicial settlement is a system that is applied to merchants, whether they are individuals or companies.
• The merchant must have good intentions and does not intend to procrastinate or delay payment, and the delay was due to reasons beyond his control.
• It is important in this regard to stop payment, as this depends on the person’s condition and the company’s financial situation.

As for the formal conditions, they are the procedures that take place under the supervision of the judiciary, and they are:

• The matter begins with a request for a judicial settlement order until the decision to commence the proceedings is issued.
• Then, after starting the procedures, the matter ends with the ratification of the court’s decision.

Judicial settlement in the Saudi system

Judicial settlement has some characteristics, which are:

• It is characterized as a system that protects against bankruptcy.
• It is distinguished by its judicial capacity.
• It is a group system.
• It is a judicial system that is applied to a merchant who has good faith.

The judicial settlement also has a special legal nature, and the sayings of jurists have been many in defining it, as some see it as a legal obligation, some see it as a judicial ruling, and others see it as a contract.

Call  Al Othman office on +966-535-008-888

Important tips for collecting your company’s debts from procrastinating and late customers

If you are having difficulty collecting your company’s debts from procrastinating and late customers, here are some important tips that can help you in this regard:

1. Effective communication: Communicate with the customer in a professional and friendly manner. KeepYour calmness And respect you at all times.
2. Negotiation: Try to negotiate flexibly about different payment options that suit the customer, such as installments or extending the deadline.
3. Offer discounts: You may be willing to offer discounts or debt relief as a reward for quick repayment.
4. Giving official notices: Send official notices specifying the amount due and the deadline for paying it. This helps in documenting the debt.
5. Use multiple means of communication: Try to contact the customer via phone calls, text messages, and e-mail to increase communication opportunities.
6. Motivate commitment: Remind the client of his financial commitment and the risks of not repaying the debt, such as the impact on…Evaluate it credit.
7. Offer flexible options: If the debt is large, you may consider offering flexible options such as settling the debt for a lower amount than what is owed.
8. Cooperate with an attorney or professional collection office: If there is no positive response, you may need to cooperate with an attorney or professional collection office to take legal action.
9. Follow up regularly: Keep track of the debt regularly and record all the details and dates.
10. Compliance with Laws and Regulations: Ensure that all of your actions comply with applicable local and national debt collection laws and regulations.
11. Patience and flexibility: You may need great patience sometimes, as collecting debts may take a long time. Be flexible and collaborative to reach a solution that works for everyone.
12. Credit reports: In some countries, delinquent customer reports may be submitted to credit rating agencies, which may have an impact on the customer’s credit rating and encourage them to pay.

You should follow all these tips and tricks carefully and professionally, and avoid instigating any illegal or unethical behavior in the debt collection process.

Debt collection offices and companies in Saudi Arabia

Resorting to a debt collection company is one of the effective options, and debt collection offices in Saudi Arabia follow certain procedures and steps to collect outstanding debts, such as:

1. Contacting the debtor: Initially, the debt collection office must contact the debtor by written letter or telephone call to remind him of the debt he owes and the amount owed.
2. Negotiation: After the first contact, the negotiation process can begin with the debtor to reach an agreement on repaying the debt. This negotiation could include offering the debtor different options to repay the debt in installments or offering discounts on the amount owed.
3. Sending an official notice: If an agreement is not reached during the negotiation process, the debt collection office can send an official notice to the debtor containing details of the debt owed and the deadline for paying it.
4. Debt Verification: The debt collection office must verify that the debt is valid and that it is owedTo pay.
5. Submit a certificate to the court: If the debt is not paid after the time limit specified in the official notice, the debt collection office can submit a certificate to the court.
6. Issuing a judgment: Based on the testimony provided by the debt collection office, the court can issue a judgment ordering the debt to be paid.
7. Judgment enforcement: Under a judicial judgment, debt collection procedures such as seizing the money or personal property of the debtor can be implemented to repay the debt.

All these steps must be done in accordance with the laws and regulations in force in the Kingdom of Saudi Arabia, and the debtor must also be treated fairly. And with consideration of his rights and duties according to legal regulations. If you are facing problems regarding debts or a debt collection office, it is best to consult a lawyer specialized in this field for legal advice.

The best debt collection office in Riyadh

If you have a dispute related to financial claims or debt collection and want to resort to litigation, do not hesitate to contact the debt-collecting experts at Al Othman Law Firm, because they have legal experts with more than 15 years of experience in Saudi Law and experience of their staff of consultants exceeds 22 years in Saudi commercial systems, and Al Othman Company includes the best debt collection lawyers in Saudi Arabia and Riyadh.

Al Othman Lawyers and Consultants are happy to serve you, so do not hesitate to contact them and consult them, as the Al Othman Law Office is considered one of the best offices in the Kingdom.

Call  Al Othman office on +966-535-008-888

Conclusion

In conclusion, debt problems have some negative consequences for companies in the Kingdom of Saudi Arabia. Companies must carefully manage their debt levels and take steps to avoid getting into debt problems. If a company faces any debt problems, it must seek professional advice to help it solve its debt problems, and seek the help of… With experienced lawyers.