In order to answer this question, you should ensure that you have a reasonable chance of recovering the debt owed to you. You should also ensure that the expenses spent in recovering the debt is justifiable.
If you are contemplating writing off small debts, you will have to be extremely cautious and consider whether writing off the small debts would set a bad precedent and encourage other small debtors to not pay. For larger debts, initially you will need to ascertain and understand why the debtor has not paid the outstanding debt. If for example the reason why the debtor has not paid the debt owing is because they have an issue with the goods you have supplied, then this issue may first need to be resolved before looking at recovering the debt. If you are aware that the debtor is in cash flow difficulties, a more viable solution would be to make attempts to negotiate a reduced lump sum payment. Alternatively arrange a payment plan.
If the debtor already has County Court Judgments (CCJs) against themselves, you may face difficulties in recovering the debt. It is best in such situations to ask the local court to check the Register of County Court Judgments. If the debtor has become insolvent, your chances of recovering any significant amount are likely to be slim. If you have a contract with a valid retention of title clause, allowing you to retain ownership of goods until they are paid for, you may be in a position to recover the goods.
If the debtor has obtained a Debt Relief Order (DRO), it may not be worth pursuing them. The DRO means that the total value of their assets is no more than £300 (this excludes any vehicle worth less than £1000). This means that you cannot enforce your rights against them for a year whilst the customer attempts to deal with their matters.
Debt Recovery Solicitors specialises in debt collection. We charge an hourly rate or a percentage of the value of the debt to be retained from the debtor. This is usually between 20% to 40%, dependent upon the age, size and complexity of the debt. Depending upon the volume of work, we can offer more tailored costs to suit your needs. For this, you will be required to contact and discuss your options.
One-off recoveries are likely to be more expensive than if you regularly use our services to pursue/ recover all unpaid debts.
Debt Recovery Solicitors are a specialist firm that specialise in the recovery of debt. We have invested heavily in IT systems which are needed to reduce the costs of handling a large volume of debts. A law firm that does not specialise in debt recovery; but undertakes this work, may charge significantly more than Debt Recovery Solicitors.
Step 1 is to send the debtor a Letter Before Action (LBA). Approximately 75% of cases end in settlement by way of payment at this step. If the matter is not settled and payment is not received, we then move to step 2.
Step 2 consists of issuing court proceedings.
Step 3 involves obtaining a County Court Judgment (CCJ).
Step 4 is commencing enforcement action. Alternatively, in step 4, insolvency and or bankruptcy action can be taken against a debtor. We have provided more details on each of these steps below.
For more information, please see our debt recovery page.
The best scenario would be for you to have a written and signed contract with the debtor. However, you may have other documentary evidence such as bank statements, purchase orders, contemporaneous notes, e-mails, text messages or witnesses to oral contracts. This evidence should show that you have fulfilled your side of the contract. The best thing in these sorts of circumstances is for you to have evidence that the debtor was aware of your terms and conditions before any contract was entered.
It is vital that copies of all correspondences are kept as well as your attempts to chase the debt or any attempts to negotiate a settlement. Although not the best scenario, but even without direct evidence, it may be possible to infer the agreement from other evidence, hence why it is crucial to keep copies of everything.
Discuss the evidence and the quality of your evidence with our specialist solicitors at Debt Recovery Solicitors before taking court action, especially if there is a dispute over the debt.
Considering all debtors to be the same is risky as every debtor is different. Every different kind of debtor raises their own difficulties and issues. Some of the issues that should be considered are as follows: (you should note, that although this list is inclusive, it is not exhaustive)
Irrespective of the size and legal position of the debtor, we would follow the same basic principles:
Small to medium size debts will be pursued and recovered via the County Courts. Larger debts will be pursued and recovered via the High Court. Therefore, the court which you use and the procedure that you follow depends on the value of the debt.
Small claims track – This is for disputed debts of up to £10,000. The cases heard in the small claims track are relatively straight forward with none to very few witnesses. These cases are informal and inexpensive.
Fast track – This track is used for debts between £10,001 and £25,000. These are also dealt with in the County Courts and these cases may have a number of witnesses and/ or experts giving evidence. These cases can be more lengthy, complex and expensive.
Multi track – This track is used in claims for more than £25,000 and these cases can be issued in the High Court. These cases are more formal and involve more complex procedures including various experts and witnesses giving evidence. These cases are significantly more expensive.
Alternatively, if you have an undisputed debt of more than £750 there are other options that you can pursue such as winding up a company or making an individual bankrupt. The threat of being wound up or being made bankrupt can itself prompt the debtor to clear the debt. If you wish to discuss these options with us, please call one of our specialist solicitors.
If you have a contract with your debtor, this may provide a credit and confirm how interest will charged.
If there is no written contract (or in addition to a written contract), the Late Payment of Commercial Debts (Interest) Act 1998 provides the basis upon which interest can be charged.
This Act sets out that interest is to be charged at 8% above the Bank of England base rate due to upto the date the payment is recieved.
Moreover, the contract which you may have with your debtor could set out your right to recover costs of collecting debts; for commercial debts, the Late Payment Act of Commercial Debts (Interest) Act 1998 allows specified amounts for 'reasonable debt recovery costs' (e.g. for the recovery of a debt less than £1,000 you can recover up to £40 in costs).
The best way to prepare for any debt recovery court case is to try and obtain as much written evidence as possible. This should include evidence of attempts to try and resolves the dispute out of court. This will aid us to understand the dispute in hand as well as allowing us to view your attempts at settlement, thereby strengthening your negotiation position and improve your chances if the case goes to trial.
With regards to evidence please see above.
The short answer is, no. Winning a debt recovery court case does not guarantee payment.
When winning a debt recovery court case (whether it was undefended or whether a dispute has been reached in your favour) you are awarded a ‘Judgement’. If the defendant still refuses to pay the debt or falls behind on any payment, you will need to attempt to ‘enforce Judgement’ via the court. There are many ways in which this could be done all which require paying an additional fee (which is added to your claim). Unless the defendant has money or assets to sell or income, the debt will not be recoverable. If the defendant is forced into insolvency, you may receive a small percentage of the money owed to you. For such reasons, it is vital to investigate the debtor’s ability to pay before initiating court proceedings.
In order to establish the best method of enforcement, you will have to ascertain whether the debtor is an individual or a company and their financial situation.
Debt Recovery Solicitors will be able to advise you on the most practical and cost-effective way of dealing with your enforcement of your Judgement.