Debt Recovery Plus Letter: Meaning, Format & What to Do

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What does a Debt Recovery Plus Letter mean?

When you take out a loan, you are liable to repay it on time. When you do not repay your loan or credit card bills on time or miss them a lot, you get a notice from your lender that is called a Debt Recovery Plus Letter.

This letter lets you know that you have missed a payment or that you are overdue. It asks you to clear the remaining amount of your loan as soon as possible. This letter is sent by a bank or recovery agency. 

This letter isn't like an SMS, email, or phone call because it has formalities. If you get this letter, it means that your account has reached the recovery process. And now your bank or NBFC is taking it very seriously. 

Now you are liable to respond to this letter or clear all your debt as soon as possible. If you are not able to do so, the bank will take further recovery action, which is a legal proceeding. 

Furthermore, if you receive a Debt Recovery Plus Letter, it doesn't always mean that legal action is taken. It's just a warning that you need to pay attention to this matter and contact your lender. 

Can a Bank Send a Recovery Notice Without a Court Order?

Yes, if you have not paid EMI or bills for a long time, your bank can send a recovery notice without a court order. This letter isn't legal action, but if you do not respond to it, it can turn into one. Here are a few things you should understand. 

• This letter isn't legal or court-ordered.
• You have 15 to 30 days to repay the due amount or contact the bank.
• This letter is sent by the bank before legal proceedings.
• If you have an unsecured loan, the bank can not seize your property without legal proceedings.
• If you have secured a loan, the bank can take action under the SARFAESI Act.

An unsecured loan is a loan like a personal loan or credit cards, and a secured loan is a home loan or vehicle loan that costs a lot. In both cases, you need to take action immediately.

What are the types of Debt Recovery Notices in India?

There are a lot of loans and different situations for those loans. So banks can't send one notice to all borrowers. Here are the most famous types of debt recovery notices. 

1. General Demand Notice

This notice is sent by your bank, lender, or lower if you have not paid the loan. This is just a formal request. If you ask you to clear the pending amount within a specified time.

You should remember:

• This notice is sent for unpaid loans, credit card dues, or other outstanding payments.
• It gives you 15 to 30 days to make the payment or respond.
• If you do not respond within a specific time. Banks can take legal action.

2. SARFAESI Section 13(2) Notice

As I mentioned above, there are different proceedings for secured and unsecured loans. SARFAESI notice is sent for secured loans like home and vehicle loans. It is sent when your loan account becomes a Non-Performing Asset (NPA).

You need to know:

• SARFAESI notice is sent for only secured loans.
• It gives you 60 days to repay the outstanding amount.
• If you do not clear the due amount within a specific time. Banks can take possession of the secured asset.

3. Section 138 Notice (Cheque Bounce Notice)

This notice is issued when your cheque is bounced. If you give a cheque for loan repayment and it is bounced, then this notice is sent to you.

You need to know:

• It is sent when your cheque is bounced.
• You get 15 days to make payment.
• If you do not pay the outstanding amount, the bank can take legal action under the Negotiable Instruments Act, 1881.

These are some types of notices you will get if you do not pay your loan. If you get any of these debt recovery notices, you need to contact your lender and pay the outstanding amount as soon as possible.

In which situation can you receive this letter? 

If you have missed one EMI or one bill payment, you are not going to receive a debt recovery plus a letter immediately. Banks and NBFCs do not do that. But if your EMIs and credit card bills are due for a long time, then you are going to receive this letter. In the following situations, you will receive this letter:

• If you have missed two or more EMI or credit card payments.
• If your cheque has bounced.
• If your auto-debit (NACH) payment has failed multiple times.
• If your account has been transferred from the regular collection team to the bank's recovery team.
• If your outstanding dues have increased, and the bank has marked your account for recovery.
• If your bank has assigned a recovery agency to recover the pending amount.

In short, if you receive this letter, it clearly means the bank has officially recorded your account as overdue. In this situation, you should immediately contact your bank. 

How can I respond to a Debt Recovery Plus Letter?

Getting this letter is very stressful. But you should not panic in this situation; handle this calmly. Do not ignore the letter and take the following steps to resolve this issue.

1. Read this letter carefully and understand why it is sent to you. 
2. Check your outstanding amount, last date, and instructions.
3. Compare loan amounts in the letter and in your loan statement.
4. If there is an error, then immediately contact your lender.
5. Contact your bank or NBFC for the next step.
6. If you are in a financial crisis, get help from your bank and ask for options like restructuring or a settlement.

After receiving a debt recovery plus letter, you should respond promptly and communicate with your lender. It will help you resolve the matter and avoid further recovery or legal action.

Conclusion

Debt recovery plus a letter isn't legal action but a formal request to you. If your loan or credit card account has become overdue, then it requires immediate attention. After receiving this letter, you have some time to respond to it or pay the outstanding amount. 

Once again, I will say that if you receive this letter, do not ignore it. Read it carefully, verify the details, contact and communicate with your lender, and keep records of all payments. For more such informative content, stay connected with Loansjagat. 

Frequently asked questions

Should I ignore letters from Debt Recovery Plus?

No, you should definitely not ignore your Debt Recovery Plus letter. Your problems are not going away if you ignore this. If you ignore it, the bank can take serious legal action against you. 

What is a debt recovery letter?

This is a formal letter sent by your bank or NBFC. It shows that you have missed a loan repayment. Now you have a legal obligation to clear the debt in full.

How to recover bad debts in India?

There are judicial processes for bad debts recovery in India. Lenders can take legal action through court if the amount is large. 

What happens if I don't pay debt recovery?

If you don't pay debt recovery, then your lender can take more action to get money back. If you have secured a loan, the bank may take action against the pledged property. For unsecured loans, the bank can approach the court to recover the outstanding amount.

Can police come for loan recovery?

Police are not involved in the loan default cases because it is not a criminal offence. If a dispute arises, the lender can approach the court and take legal action. 

How do I know if I am being scammed by a debt collector?

If they ask you for your personal and banking details, not sharing their identity, threatening you to make immediate payment, and they ask for payment through unusual methods then it is a sign of scam. 

What is a 7-day debt recovery letter?

This is a formal notice from the bank that is sent to remind you that you are legally obligated to repay the loan, and if you do not do so, the bank will take serious legal action. You need to take action within 7 days. 

How do I stop a debt collection letter?

If you are receiving constant calls and notices from the bank, then you should not ignore them. Contact your lender immediately. 

Will creditors accept a 50% settlement?

Yes, your creditor may accept your 50% settlement. But it is not guaranteed. Before approving your loan settlement, banks check your outstanding loan, repayment history, current financial situation, and loan settlement policy. 

What is the legal process of debt recovery?

The process of debt recovery starts with a bank or NBFC. The lender files the case to recover the outstanding amount. The court hears the case and decides how the debt should be recovered.