The following real life example illustrates why you should always get your credit application forms and personal guarantees verified before you extend credit to a customers. It also illustrates why you should engage a debt collector even when you think it is unlikely that the amount can be recovered.
1. The Facts
In this real life example a client asked us to assist with the recovery of an outstanding debt of approximately $20,000 that the debtor was unable or unwilling to work towards resolving. A detailed credit application form and personal guarantee was signed by the sole director a few years earlier.
2. What an ASIC Check revealed
On review of the forms completed by the directors, it was noted that he stated that he owned his own home. This initially led us to think that we would be able to recover the amount owing fairly easily. However, when we did an ASIC Property Title Search to confirm ownership after proceeding through to the Magistrates’ Court, it was discovered that the house was not owned by the director but his wife solely. This was very worrying as it seemed that it would now be extremely difficult to recover the amount owing.
3. What we did next
Luckily, in this case we managed to uncover other assets owned by the sole director. We had information about the sole director’s middle name and this helped in our ASIC Property Title name search – which led us to finding out about a property owned by the director. If we had not had his middle name we would have found it much more difficult and costly in identifying his ownership.
By taking that extra step we would were able to uncover that the director did in fact own a property (even though it was not the one he declared on the personal guarantee form he signed). Armed with this information we were able to recover the debt plus interest and legal costs – much to the relief of our client.
4. Lessons Learned
At $66.00 an ASIC Property Title search is money well spent to confirm whether a director owns the title to their own home. We find a large number of directors simply tick the ‘ownership’ square, either not thinking about the title being in someone else’s name (eg their spouse’s name) or deliberately being deceptive.
The client now performs ASIC checks on every new credit application. Each application has both a Company search and Land Title search done to confirm that the guarantor has the legal title to the residential property listed.
The second lesson learned is to not to give up too easily when trying to collect a debt from a customer. An experienced debt collector will have lots of experience in handling difficult customers refusing to make payment. By taking that extra step in this case we were able to recover an amount that our client thought was virtually unrecoverable.
Further, with a no collection, no charge policy – i.e. you only pay if the debt is in fact collected you really have nothing to lose.
Brodie Collection Services is one of Australia’s leading debt collection firms, with offices in Melbourne and Brisbane. They can provide ASIC search services from a low $46.50. They also provide debt collection services on a no collection, no charge basis. You can trust them with all your debt recovery needs. Visit www.brodiecollectionservices.com.au to find out more about the debt collector services that are offered by Brodie Collection Services or call us on 1300 276 343.
This information provides a general summary only and is not intended to provide specific advice for your individual circumstances. It is not a substitute for professional advice and should not be relied upon as such.