A Practical Guide for Creditors
If someone owes you money and won't pay, Kenyan law gives you several ways to recover it. From a simple demand letter to court action, execution, and in some cases insolvency proceedings. The right approach depends on the amount owed, the evidence you have, whether the debt is disputed, who the debtor is, and how much time has passed.
Start with the evidence
Before you do anything else, confirm exactly what is owed and why. Gather:
- Contracts, loan agreements, invoices, purchase orders, delivery notes
- Statements of account, receipts, payment schedules
- Correspondence, emails, texts
- Guarantees and acknowledgments of debt
- Bank records and demand letters already sent
- Evidence of any part-payments
Also check the contract for clauses on interest, default, penalties, dispute resolution, arbitration, jurisdiction, and legal costs. These documents will shape your strategy and tell you which forum to use.
Step 1: Send a formal demand
A demand letter should state who is owed, how much, why, when it fell due, applicable interest, supporting documents, a deadline to pay, and the consequences of non-payment.
A good demand does two things: it puts your position on record, and it gives the debtor a chance to settle before you go to court. Courts generally expect a demand before litigation, and skipping it can affect costs later , even if it doesn't bar your claim outright.
Note: an ordinary demand letter is not the same as a statutory demand. A statutory demand is a formal step under the Insolvency Act with more serious consequences (it can support insolvency proceedings). Use the right tool for the situation.
Step 2: Consider negotiation and settlement
Court isn't always the fastest route. If the debtor accepts the debt but is short on cash, consider installments, restructuring, security, or a settlement agreement.
If you agree to a repayment plan, put it in writing. This includes total owed, instalment amounts, dates, interest, what happens on default, any security and your rights if the arrangement breaks down.
Watch limitation periods. Under section 23(3) of the Limitation of Actions Act, a written and signed acknowledgment of debt, or a part-payment, restarts the limitation clock from that date. Section 24 requires the acknowledgment to be in writing and signed. Always get this in writing and don't rely on verbal promises.
Step 3: Check limitation before filing
Under section 4(1)(a) of the Limitation of Actions Act, a contract claim generally must be filed within six years of the debt arising. Old debts aren't recoverable forever.
The clock can reset with a valid written acknowledgment or part-payment (section 23(3)), or shift with fraud, mistake, or a judgment. Check the dates carefully before filing.
Step 4: Pick the right forum
Not every claim belongs in the High Court.
Small Claims Court — handles straightforward claims up to KShs. 1 million, including contracts for goods/services, money held and received, some property claims, and set-off/counterclaims. It does not cover employment disputes, land title/possession disputes, and certain other matters. So both the value and the nature of the dispute matter.
Otherwise, a subordinate court, the High Court, or a specialized tribunal may apply depending on the claim.
Step 5: File a civil claim if needed
If demand and negotiation fail, file suit. Your pleadings should cover: the relationship between the parties, the obligation giving rise to the debt, your performance (if relevant), the amount due, when it fell due, any demand made, the debtor's failure to pay, and the relief sought.
Organize your documents well as these cases are usually won or lost on paper evidence. For straightforward liquidated claims, the Civil Procedure Act also provides for faster judgment where the debt is undefended.
What if the debt is disputed?
Debtors may dispute the existence of the agreement, the amount, whether goods/services were delivered, quality, terms, interest, delivery, authority to contract, or even who is liable.
Assess the likely defence before filing. This matters especially for insolvency routes — a statutory demand should not be used to sidestep a genuine dispute over liability.
Step 6: Statutory demand against a company
Under section 384 of the Insolvency Act, a company can be treated as unable to pay its debts if it owes a creditor KShs. 100,000 or more, is served a written demand at its registered office, and fails within 21 days to pay, secure, or compound the debt. (Other grounds exist too, such as unsatisfied court execution.)
This is a powerful tool but has strict requirements, and a debtor can challenge it. Don't treat it as just a stronger demand letter.
Note: failing to meet a statutory demand doesn't automatically lead to liquidation — you'd still need to satisfy the Insolvency Act's requirements for that separately.
What if the debtor is an individual?
The Insolvency Act also allows bankruptcy proceedings against individuals. The prescribed bankruptcy threshold, as recognized by Kenyan courts, is KShs. 250,000 under the Insolvency Regulations. Bankruptcy is specialized and requires you to weigh the debtor's assets, other creditors, and likely recovery before pursuing it.
Step 7: Get judgment
If your claim succeeds, the court enters judgment for the amount proved. But judgment isn't the finish line , you may still need to enforce it.
Step 8: Enforce the judgment
If the debtor doesn't pay voluntarily, options include:
- Attachment and sale of property — seize and sell attachable assets under the applicable rules.
- Garnishee proceedings — where a third party (e.g. a bank) holds the debtor's money. Order 23 of the Civil Procedure Rules allows attachment of debts owed to the judgment debtor, including bank deposits.
- Other execution methods under the Civil Procedure Act and Rules, depending on what assets can be identified.
Interest on the debt
Start with the contract, if it sets an interest rate. Where the court awards judgment, the Civil Procedure Act lets it award interest from filing to judgment, and further interest after that. If the decree is silent on post-judgment interest, the default is 6% per annum.
Track separately: principal, contractual interest, pre-suit interest, post-suit interest, and interest on the judgment.
Secured debts
If the debt is secured by a charge over land, chattel security, guarantee, debenture, or lien, don't treat it as an ordinary unsecured claim. Review the security documents for the extent of the security, amount secured, default triggers, enforcement rights, notice requirements, and any statutory limits on enforcement.
If the debtor is hiding or moving assets
Get legal advice immediately as available remedies depend heavily on timing and facts. Don't wait for judgment before thinking about what assets might satisfy it; by then it may be too late.
Recovery is about more than filing suit
A judgment is only useful if there's something to enforce it against. Watch for red flags: no identifiable assets, empty accounts, heavily encumbered property, insolvency, ceased trading, multiple competing creditors, or restricted enforcement options. Assess this early.
Common mistakes to avoid
- Waiting too long — risks limitation and makes enforcement harder.
- Relying on verbal promises — get agreements in writing.
- Losing the paper trail — keep every invoice, note, and record.
- Sending vague demands — be specific and give a real chance to respond.
- Filing in the wrong forum — check both value and nature of dispute.
- Ignoring dispute-resolution clauses — arbitration/mediation may be required first.
- Treating every debtor the same — a stubborn payer differs from a genuinely insolvent one.
- Assuming judgment equals payment — enforcement is a separate step.
Practical recovery checklist
- Establish the debt and calculate the amount owed
- Gather the evidence
- Check limitation
- Identify the debtor and their assets
- Send the right kind of demand
- Attempt settlement
- Choose the correct forum
- File proceedings if necessary
- Obtain judgment or settlement
- Enforce
How we can help
We assist creditors with document review, recoverability assessments, demand letters, negotiation, repayment arrangements, statutory demands, debt-recovery litigation, Small Claims Court claims, garnishee and attachment proceedings, and insolvency-related recovery advice.
