Debt сollection in Malawi

The debt collection process in Malawi 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 possibility of disputing 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 commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order 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 messengers. 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 limitation period. The limitation period 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 run anew.

Judicial debt collection in Malawi is carried out in the ordinary and simplified judicial procedures.

The courts of first instance are the Magistrate’s Court and the High Court. The Magistrate’s Court has the authority to hear cases with a claim value of up to Kwacha 2,000,000.00. The High Court has unlimited jurisdiction.

Ordinary legal proceedings are initiated by filing a summons with the court. If the summons complies with the established procedural requirements, the court registers it and organises its service on the defendant.

Once the summons is served, the defendant has 14 days to file an answer and 28 days to file a defence. If the defendant fails to file a defence within the specified time, the creditor may ask the court to enter judgment against the defendant in absentia. If the defendant files the document, the court will set a date for a pre-trial hearing no later than 28 days after service.

A plaintiff may apply to the court for summary judgment if the defendant has filed a defence but the plaintiff believes that the defendant has no realistic prospect of defending the claim. Such an application must be made under oath and set out the facts supporting the plaintiff’s arguments. The statement must be served on the defendant no later than 14 days before the hearing date. In turn, the defendant may file a counter-statement under oath, in which he sets out the reasons why the defendant has a valid defense to the claim. The defendant’s statement must be served on the plaintiff 7 days before the hearing. If the court is satisfied that the defendant does not have a valid defense and there is no need for a trial, the court must enter a decision in favor of the plaintiff. If the court finds that there is a dispute between the parties regarding a fact or a question of law, the court will not enter a decision in the summary procedure and will continue the consideration of the case.

In order to establish the truth in the case, the court forms a list of questions of fact and law for which evidence is required and determines the type of evidence and the method of its provision. After completing the stage of receiving and considering evidence, the court makes its decision within 90 days. Each judgment entails the accrual of interest at the rate of five percent per annum or at such other rate as the parties have agreed upon.

The decision of the Magistrates’ Court may be appealed to the High Court within 14 days of the decision being made. The decision of the High Court may be appealed to the Supreme Court of Appeal of Malawi within six weeks of the decision being made. There is no further appeal against the decision of the Supreme Court of Appeal.

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 debtor’s movable and immovable property with their subsequent sale; seizing the debtor and keeping him in custody for a period not exceeding six weeks or until the amount due is paid.

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 100,000 Malawian kwacha) and the debtor has not fulfilled it within the time limit set by the court; 2) if the creditor initiated enforcement of a court decision on debt collection against the debtor, but it was not executed in full or in part; 3) a person entitled to a security interest in all or a substantial amount of the debtor’s property has appointed a recipient of the security interest.

As part of the bankruptcy procedure, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions concluded with the intent to cause damage to creditors. Such transactions should include, in particular: 1) an insolvent transaction (any transaction concluded during the period when the debtor was unable to pay 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 concluded with the aim of giving an advantage to one creditor over 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 for international debt collection in Malawi, 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 MALAWI

07.01.2025

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