Welcome to our monthly blog post discussing the cash recovered in each stage of the collection process. We have tried to assign all recovery payments to a specific stage that was set closest to the payment date. While this approach is not always correct in the case where recovery stages are not promptly updated, it gives a very good overview of the drivers behind recoveries.
The total amount of cash recovered in February 2018 was €202,026.
Why is this important?
When looking at the table above, it shows how effective each stage of the process is at recovering cash owed to investors and can help you understand why some stages are more effective than others. If you haven’t already read about our ‘3-step collection and recovery process’ and February’s post then we would recommend that you check them out first.
Default & Court VS Bailiff stage
Whilst there are more than double the amount of loans in the Default & Court (10,422 pcs) stage than in the bailiff stage (4,913 pcs), only €45,794 more was recovered in the first stage. Overall, this shows how much more effective the bailiffs can be at recovering cash than in the methods used in other stages. Largely, this due to the bailiffs having the rights to freeze a borrower’s net income and assets, regardless of the loan being unsecured, and therefore makes a significant impact on the amount of cash recovered.
Ultimately, we aim to proceed to this stage as quickly as possible in order to begin generating a cash flow for investors. In February, the amount of cash recovered in the bailiff stages increased by approximately 9%.
Very rarely, Bondora receives a notice about criminal proceedings related to a borrower. After an official notice is received from the authorities, the loan will be frozen until the police finish their investigation and the case is ready to be sent to court. In these types of cases, it is usually extremely unlikely that any funds will be recovered.
Other types of rare cases include bankruptcy and debt restructuring. The bankruptcy process is only initiated if the bailiff has not been able to collect the debt after freezing the borrower’s assets and accounts. Bondora either initiates this bankruptcy on its own or joins an existing bankruptcy filing. A distribution plan is then set up by the courts or bankruptcy registrar for the borrower’s assets and depending on the decision from the court, a new payment schedule is created for retrieving the principal. The court may also use debt restructuring to create a new payment plan for the debtor.
Once all cases can automatically be filed to the courts, we expect the cash recovered in the bailiff stage to show the largest amounts across all countries. This is important because it means that we can start to generate a cash flow in a more time-efficient manner for investors.