Due to the current ongoing pandemic as a result of Covid-19, many of our clients have been asking for advice on how to deal with their debts.
We would firstly start off by reassuring all our clients that we are still functional, and will continue to provide our full services. We now have a number of employees working on site across our offices. Other members of staff also continue to work from home, whilst still being fully contactable. Our staff continue to find innovative ways of working by utilising the various systems we have in place.
Under the current unprecedented circumstances, it is vital for businesses to consider the importance of maintaining cash flow to keep their business going throughout these difficult and unusual times.
With regards to recovering debts; the disruption that the judicial system have faced, in particular the Courts, this will have a significantly negative impact on enforcing the payment of outstanding debts. Many debtors are aware of this and are taking advantage of the situation.
The administrative processing times of claims have taken a massive hit, as a result of trying to minimise social contact and protect Court staff. Many hearings are being adjourned, whilst others are being dealt with remotely via telephone and/or video link.
The most urgent matters will of course be prioritised. In these unprecedented times, it may be advisable for a business creditor to act swiftly and begin litigation in order to pursue debtors, due to the economic uncertainty and the collapse of many companies, even those who were considered large prior to the pandemic.
However, the creditors must be mindful of the time-consuming nature of cases, due to them now taking significantly longer to process and deal with by the Courts. New claims will certainly not be issued as quickly as before, until everything goes back to pre-lockdown state.
Moreover, it should be noted that issued claims which go on to be contested by the debtor are going to be considerably delayed in coming before a Court. As time goes on, the current and growing backlog of adjourned hearings will not help matters and will only serve to increase delays.
Ordinarily, if we issue a claim which is not defended by the debtors, the debtor will succumb to a Default Judgment, whereby the claimant business may be awarded judgment in their favour. Once this is ordered by the Courts, we can then pursue various methods of enforcement to recover judgment debts.
However, due to the decrease in Court activity, this has had a knock on affect to the next step of enforcement of proceedings. For example, when instructing bailiffs, concerns regarding social distancing will hinder attendances at a debtor’s property. It may be that going forward, assuming that the debtor’s circumstances warrant them, applications for Charging Orders on property, Third-party Debt Orders on bank accounts or Attachment of Earnings Orders on debtors who are employed, will probably not be as affected and therefore more viable methods of enforcement.
For debts which are owed by individuals or sole traders, one way of attempting to reduce the timeframe of potential claims, would be to send an Acknowledgment of Debt Reply form, when sending correspondence to the them about their liabilities. This would mean that if they acknowledge that the debt is owed, they can then put forward proposals as to payment plans and what they can afford. This is also a service which we do offer.
This would mean that they are unlikely to be able to defend any subsequent Court proceedings, thereby significantly reducing the time to conclusion.
We would also advise that a business creditor could also consider serving a statutory demand on individuals, sole traders or businesses. If the debt is not paid within 21 days or service of a statutory demand, then the creditor can apply to make the debtor bankrupt (for individual debtors) or in the case of a company, can apply to wind the company up. Whilst the actual Court processes for doing this are also likely to be delayed by the current crisis, often the threat of bankruptcy or winding up is enough to make the debtor settle the debt or come to a satisfactory arrangement to make payment by way of instalments.
Lastly, we continue to review the situation and will regularly update this post with any new developments. We are confident in our ability to respond quickly to any changes and remain effectively operational as a firm, whatever the circumstances may be.
Debt Recovery Solicitors provide tailored legal advice to businesses on a wide range of civil disputes. If you require any assistance from our team to help you understand the current situation in further detail or to answer any questions about money claims and enforcement; then please do not hesitate to contact us on 0800 002 5030 or visit our website at www.debtrecoverysolicitors.co.uk for further information.