Lending money is never an easy task. There is always a possibility of some sort of complication. Let’s say you lent some money to a friend using an IOU or your business provided a service to a client without prepayment.

What happens if they miss the loan repayment?

If they stall the payment and don’t pay on the stipulated timelines that initially agreed on, here are the steps you can follow:

1. Understand the debtor (communication is key, just give them a call)

2. Get a court judgment

3. Enforce the court judgment

Note that this is not to be taken as legal advice. This is a rough roadmap of sorts that you can follow.

Understand The Debtor

The first step is to know more about the debtor. You have to determine specifically who is your debtor before you can proceed any further. Understanding the creditworthiness as well as the risk profiles of the debtors is important because you can’t proceed efficiently without this knowledge.

There are two possibilities.

1. Is the debtor a person? If yes, then is the amount of owed debt greater than S$15,000? In this case, you can go for a bankruptcy proceeding. People facing bankruptcy proceedings will pay up sooner than later because bankruptcy brings upon personal limitations.

2. Is the debtor a company? If yes, then what personal guarantees are involved? Also, who are the directors of the company?

It’s time to move on once you have this information under your belt.

Tip #1: Ascertain the financial conditions and assets of the debtor

You first have to make sure that the debtor has assets. If the debtor has no money then there’s no point in proceeding with a legal procedure to recover your debt.

This is the time to do checks on the debtor. Get information on the financial standing of the debtor, whether a person or a company. Debt collectors or lawyers can be greatly helpful at this stage.

Here are the pieces of information you need:

  • What are the financial circumstances of the company or the person?
  • What is the income, if any, of the company? If it’s a person, then do they have a job?
  • What are the assets available for attachment?

Tip #2: What to do if there are no assets?

If the person or company simply cannot pay you then it’s best to come up with a repayment plan. Legal proceedings will not be cost-effective because they cost a lot. Do not proceed legally unless you are sure that you can recover the debt if you invest in the legal proceedings.

However, don’t just believe that somebody has no money. Employ legal help to seek information regarding the accurate financial standing of the company or person.

If in the case where you really need your money urgently, you can recommend your friend to take a personal loan from a legal lender to help the situation. Many financial institutions in Singapore offer loans at reasonable interest rates. Adding a third party into the mix will make things more professional.

Get a court judgment

You can get a court judgment (Order of the Tribunal) once you are sure that the debtor isn’t bankrupt and has assets or money that can be used to repay your loan.

For debt up to S$20,000, you can file a claim with the Small Claims Tribunals. Hiring a lawyer isn’t important in this case. Additionally, the filing fees are pretty minimal.

Check with the limitations of the Small Claims Tribunals and proceed accordingly for sums up to S$20,000.

Tip #3: Get a lawyer if the debt is more than S$20,000

Small Claims Tribunals will not be effective if the owed debt is more than S$20,000. In this case, you will need to file a civil claim with the court. It will make the process a normal civil litigation process.

At this point, it’s recommended that you get a lawyer (though technically you can represent yourself).

A lawyer will help you ascertain how much you can potentially spend in the proceedings. They will also be able to devise the best strategy to get your money back.

The first step is to send a letter of demand. It should compel the debtor to pay up but shouldn’t be too expensive.

Debt enforcement

There is a chance that the debtor still doesn’t pay up after a court judgment and a letter of demand. If that’s the case then you are left with only one option – enforcement proceedings.

Most enforcement procedures end by writ of sale or seizure of the debtor’s held assets. The lawyer will help you in the enforcement.

Other considerations and tips


So, we pretty much covered the whole process of debt recovery. Here are a few other tips that will help you recover your debt. Note that not all of these tips apply to everyone.

Tip #4: Don’t hesitate in contacting the debtor

Don’t put off contacting and communicating with the debtor for months after they are overdue for their payments. Giving them the benefit of doubt and contacting them regularly when they are even a little behind on the payments can help you slowly condition them towards paying and remembering the money they owe.

Friendly communication is one of the best motivations for making people pay their debt back.

Payment delays should be communicated instantaneously and follow-ups need to be made frequently as well.

1. If there are penalty payments involved then it’s your duty to also relay such information when you contact them.

2. If there were any specifics that both parties agreed on regarding repayments or failure to make repayments then those should also be shared as a brief reminder.

Tip #5: Monthly follow-ups work as great reminders

Keep reminding your debtors of the amount they owe. Sending them neat reminders every once in a while (monthly being the most friendly) will help a lot.

Negotiations can initiate once the debtor doesn’t entertain your reminders. It will also give you grounds to move with legal proceedings if you wish to. You will be able to claim that multiple reminders were sent to no response and that’s why you’re moving the claim to the courts.

It’s also possible for people to simply forget the money they owe. Maybe they cleaned up their accounts just recently or went through an accounts overhaul and the owed amount was skipped somehow. In any case, a reminder does no harm but can do a lot of good.

Tip #6: Professionalism, calmness, and a negotiation stance

It’s easy to lose yourself when trying to recover your debt. It’s quite understandable. It’s your hard-earned money that you loaned with a promise. And now that promise is far from being fulfilled.

But it’s important to think from their perspective as well. Maybe they are caught up in some other things or worse yet, they are simply not in a position to pay you.

Even if you don’t relate to them, it’s important to maintain professional composure when dealing with your debtors.

Stay calm throughout the proceedings.

Also, keep in mind that all communication for debt recovery is a type of negotiation. Be open to options and alternative payment methods.

As this is a negotiation, you should be open to counteroffers. Don’t brush aside counter offers instantly or even accept them. Process the counter offers and understand their ramifications before you move on.

You can also ask for a gesture of good faith in a negotiation. This could range from providing some sort of collateral on the amount owed to make a partial payment. This helps both parties.

Dealing with loan recovery firms

It might look lucrative to get help from professional debt recovery firms or debt collectors. If you do go this route then make sure that you have done your research. They generally have a flat upfront fee and they also take a percentage of the recovered debt.

Loan recovery firms can be seen as a last resort in some cases. However, getting the help of a lawyer first can be a better idea under most circumstances.

Loan recovery firms are regulated in that they cannot use force or harm anyone. However, it’s not unlikely that they will deploy some unconventional strategy to keep their success rates up. If possible, try to learn more about their recovery process before you hire them. It might actually be a blow to your reputation if they don’t do a clean job of recovering the debt.

Let’s conclude

Recovering debt isn’t always easy. You can end up lending money to people or other businesses who don’t make repayments on time and sometimes, don’t pay anything for months. They might have their reasons or motivations but as it’s money you are owed legally, you can go to court for the repayment.

However, as we mentioned in our process, you should first determine the financial standing of the company or person. Are they bankrupt? Do they own assets in Singapore? Who are the directors? Is the person currently employed? And so on.

Sometimes, it might be better for your friend to borrow from a bank or a licensed moneylender instead.

Knowing all this will allow you to better strategize your debt recovery process. A lawyer might or might not be necessary.