One of the most undesirable things for businesses during the debt collection process is when the debtor has committed to payment but does not pay on time. In addition to taking necessary collection measures, the business also needs to understand the reasons that can lead to delayed payments to take necessary actions to ensure their rights. In the following article, TNTP’s lawyer will provide reasons why the debtor may not pay on time.
1. Financial difficulties
This is perhaps the most common reason for a debtor’s not pay on time because business operations are intended to generate profits but also carry many unpredictable risks. If the debtor’s business does not generate enough profit after deducting necessary expenses, they will usually not be able to pay their debts.
Financial difficulties can arise from many reasons, such as natural disasters, disputes with other partners of the debtor, being penalized for not fulfilling tax obligations on time, or suffering losses due to business not meeting expected results. These reasons lead to the debtor not having a stable income to accumulate long-term debt repayment. At that point, the debtor will usually have enough funds only to maintain operations without the ability to repay debts.
When a business discovers that a debtor is facing financial difficulties, it should consider whether the debtor has the financial capability to repay the debt to take appropriate legal measures. Financial difficulties can push the debtor into a state of insolvency, which makes it very difficult for businesses to recover their debts.
2. The debtor has too many debts to pay off.
It is normal for a debtor to have multiple debts from different creditors in business operations. Typically, the debtor will have to balance the costs to prioritize paying off the creditors they feel are most in need of payment. The prioritized creditors may include:
• Creditors who are important partners of the debtor
• Creditors who have taken debt recovery measures that have caused inconvenience to the debtor
• Creditors who have exerted significant pressure on the debtor’s operations
In contrast, debts that the debtor typically tries to extend as long as possible may include:
• New debts (less than 6 months old)
• Small debts (less than 10 million VND)
• Debts that the creditor has not requested payment for
• Debts of creditors who are legal entities that have been dissolved or bankrupt
It can be seen that having many debts as a debtor is quite normal. However, the priority order for payment by the debtor will vary depending on the debt and whether the creditors are resolute in debt recovery. Therefore, for the debtor not pay on time, the creditor needs to take necessary and resolute debt recovery measures to create pressure on the debtor to pay on time.
3. Inability to Pay by the Debtor
This is the case where the debtor is unable to maintain its operations due to difficulties in its business activities. As a result, the company will no longer be able to generate profits or be able to pay its debts. This is the worst-case scenario for debt collection because the debtor is no longer able to pay any amount of money to the business.
Extended periods of unprofitable business or a crisis that causes the debtor to suffer irrecoverable losses often lead to a situation where the debtor is unable to pay. This is why creditors must always take action to review, check, and contact debtors, even when they are still operating stably, to assess their ability to pay and prepare necessary contingency plans if signs of inability to pay begin to emerge.
For debtors in this situation, creditors need to quickly initiate legal proceedings with competent dispute resolution agencies to request payment from the debtor. Once there is a legally effective ruling, judgment, or decision, even if the debtor is unable to pay, the creditor can still submit an application for enforcement to the competent civil enforcement agency to request the enforcement of the debtor’s assets and accounts by force to serve the process of debt collection. At that time, the enforcement agency will carry out necessary activities in accordance with legal regulations to force the debtor to fulfill its obligation to pay the debt.
The above is an article on the topic ” The reason why the debtor not pay on time” by TNTP lawyer. Hopefully, this article will be beneficial to businesses in debt collection activities.