Debt Collection in Kenya

The debt collection process in Kenya begins with an assessment of the debtor’s solvency, their line of business, the history of the business, the availability of documentary evidence of the debt, ongoing court cases and enforcement proceedings, and the ability to dispute the debt. This assessment determines the strategy that will be used on behalf of the client in the collection process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in business, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messenger. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve early recovery of the debt.

The average time for informal out-of-court collection is up to 60 days (except in cases where a payment plan has been agreed upon). If this stage does not produce the expected results or after an initial analysis it becomes clear that it is not applicable, then it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the statute of limitations. The statute of limitations for debt collection is 6 years. The limitation period is interrupted if the debtor acknowledges the debt in writing or makes a partial payment of the debt. After the interruption, the limitation period begins to count again.

Judicial debt collection in Kenya is carried out in the usual and simplified judicial procedures.

The usual judicial process begins with the filing of a claim in court. If the claim meets the established procedural requirements, the court notifies the defendant to appear at the hearing and present his objections.

On the appointed day, the parties are required to attend the hearing in person or through their representatives. If the defendant fails to appear, the court may hear the case unilaterally or issue a re-summons. The court may also compel the defendant to appear by applying the following measures: issue a warrant for his arrest; seize the defendant’s property and sell it; impose a fine of up to one thousand shillings; require a guarantee for the debtor’s appearance, and in case of failure to comply, imprison the debtor.

When the parties appear, the court conducts an adversarial hearing, during which the participants exchange opinions, provide documents and present arguments in support of their positions. If the court receives a full picture of the circumstances of the case at the first hearing, it may issue a decision immediately. Otherwise, the court continues the hearing by organizing an additional investigation.

During the investigation, witnesses are questioned, experts are called in, objects are inspected, the authenticity of documents is verified, the personal participation of the parties is requested and other necessary procedural actions are performed. Upon completion of the investigation, the parties participate in a final discussion of the case, after which the court makes a final decision.

The summary procedure applies to the recovery of civil debts and is governed by the Debts Act. The procedure is carried out by the Magistrates’ Courts and is commenced by the presentation to the court of a complaint containing particulars of the claim.

On receipt of the complaint, the judge may issue a summons setting out briefly the salient points of the complaint and requiring the defendant to appear at a specified time and place to answer it. On the appointed day, whether or not the defendant appears, the judge shall hear the complaint in the same manner as if the defendant had appeared in response to the summons. Upon hearing the complaint, the judge shall make a decision which may order the defendant to pay the amount demanded or dismiss the complaint.

A decision of the Magistrates’ Court may be appealed to the High Court. A decision of the High Court may be appealed to the Court of Appeal. A decision of the Court of Appeal is subject to appeal to the Supreme Court of Kenya. The time limit for filing an appeal is thirty days from the date of the impugned decision.

Once the judgment has entered into legal force, the creditor must initiate enforcement proceedings. A judgment may be brought for enforcement for 12 years. Within the framework of the enforcement of a judgment, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing the debtor and keeping him in custody for a period not exceeding six months.

If the debtor is unable to pay the debts, the option of bankruptcy of the debtor should be considered. The debtor is considered unable to pay the debts in the following cases: 1) if the creditor has served the debtor with a demand for payment of the debt (the amount of the debt must be at least 250,000 Kenyan shillings) and the debtor has not fulfilled it within 21 days; 2) if the creditor initiated enforcement of a court decision to collect the debt against the debtor, but it was not executed in full or in part; 3) if the debtor is a company and the creditor proves to the court that the debtor is unable to pay its debts as they fall due (for example, the value of the debtor’s assets is less than the amount of its liabilities). As part of the bankruptcy procedure, if the debtor’s assets are insufficient to fully satisfy the claims of creditors, it is possible to cancel the debtor’s transactions concluded with the intent to cause damage to creditors. Such transactions include, in particular: 1) an insolvent transaction (any transaction concluded during the period when the debtor was unable to pay his debts); 2) a gift concluded during the two years preceding the initiation of bankruptcy proceedings; 3) a transaction at an undervalued value concluded during the two years preceding the initiation of bankruptcy proceedings; 4) a transaction made with the purpose of giving an advantage to one creditor in relation to other creditors;  5) establishment of a floating lien on the debtor’s assets. As a result of the cancellation of the above actions and transactions, it is possible to return back to the debtor what he lost from such transactions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you have any questions or need support on international debt collection in Kenya, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY KENYA

26.12.2024

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