Not getting paid is an unavoidable problem faced by any business operating on credit terms. It is not uncommon to get legal assistance to recover some of these debts. Here’s a summary of how debts can be recovered through legal means.

  1. Letter of Demand 

The first step to recovering a debt is always to ask for payment.  While not mandatory, a letter of demand through a lawyer can be a final reminder to the debtor to pay up to avoid being dragged to Court.

How a debtor responds to a letter of demand may say much about the debtor. If the business is a going concern, a lawyer’s letter of demand is likely to be taken seriously.  A letter of demand that is ignored could mean that the debtor does not have financial capability to pay the debts, or is just plain belligerent or recalcitrant.

In the absence of a response, a creditor can conduct basic searches to assess the commercial viability of pursuing this debt. Don’t throw good money after bad.

  1. Commencing Claim in Court

If there are no red flags regarding pursuing the debt, the next step is to commence a claim in Court. All documents such as the contract, the invoices, purchase orders, delivery orders, written correspondences must be provided to your lawyer to enable them to draft the claim.

When a court claim is filed, the person making the claim is referred as the Plaintiff, and the person being sued is called the Defendant.

Once filed and extracted from the Court system, the Court papers will be served on the Defendant who has to enter appearance (ie: inform the Court and the Plaintiff that they intend to contest the suit) within 14 days.

If the Defendant does not enter appearance, a judgment in default can be obtained. A judgment in default is an “automatic” judgment granted in favour of the Plaintiff, without the Plaintiff having to prove their case on merits.

  1. Settlement negotiations

Settlement negotiations could happen at any time. A debtor may offer to negotiate the debt after receiving a letter of demand, or after being served with court papers. Settlement negotiations can even take place just before trial or in the middle of trial itself.

In deciding whether to “settle”, here are things to consider:

  • Is there sincerity in the offer, or is the offer to settle a delay tactic? Is the debtor demonstrating good faith by offering any upfront payment?
  • When would you actually receive payment?
  • How much legal costs and time will you be saving through this settlement?
  • What is your recourse if the debtor defaults on the settlement terms?
  • Will this settlement impact the recoverability of any other debts?
  1. Obtaining Judgment

If there is no settlement and the debtor enters appearance to defend the suit, you have the option of filing for summary judgment. Summary judgment is a “short cut” approach to obtaining a judgment without the need for a full trial.  To file for summary judgment there must be documents to sufficiently show a clear and straightforward case and that none of the issues raised by the debtor requires witnesses to testify.

If a summary judgment fails, or is not applied for, the case will go for trial. In a trial, witnesses will have to testify. The court will then deliver its decision. If the claim is allowed, the court will hand down a judgment. Judgments after trial are subject to appeal.

  1. Enforcement

After successfully obtaining a judgment (whether it is a judgment in default, summary judgment or a judgment after trial), you generally have 12 years to enforce the judgment through various methods if the debtor still refuses to pay, including:

  • Garnishee Proceedings – an order for monies belonging to the debtor held with banks or other third parties to be paid directly to you in settlement of the judgment
  • Judgment Debtor Summons – an order for the debtor or its directors to attend Court to explain why it hasn’t paid and how it intends to settle the debt
  • Writ of Seizure and Sale – a writ to have moveable (such as office furniture) or immovable properties (land) sold via an auction to settle the debt
  • Bankruptcy or winding up – while technically not a method of enforcement, bankruptcy or winding up proceedings can result in the judgment debt being paid as debtors may want to avoid being made bankrupt/wound-up.


Th’ng Yan Nie is a Senior Associate in the dispute resolution practice group at Donovan & Ho.  She has a wide range of experience in litigation matters including contractual and commercial disputes, compulsory land acquisition, debt recovery and strata and property management issues.

Donovan & Ho is a law firm in Kuala Lumpur, Malaysia.  Our practice areas include employment law, dispute resolution (litigation and arbitration), corporate and tax advisory, and real estate/conveyancing.  Have a query? Contact us.

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