This guide is intended to demystify the process of commercial debt recovery. If you would like discuss your requirements with us please complete our form. 

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Pre Action Letters

We always recommend that we send a letter to your debtor threatening proceedings. This should be accompanied by a copy of the statement of account showing the sum due (in order to comply with the draft protocol for debt recovery litigation, which we anticipate will form part of the Civil Procedure Rules shortly).

The letter can be sent by fax or post or even delivered by hand as required. Your letter will be sent on the same day your instructions are received.

Our charge for the service is £1.50 plus VAT (plus the costs of delivery if not sent by post or fax).

If the debtor is a Limited Company, the debt exceeds £750.00 and it is not disputed, the letter can threaten winding up proceedings (rather than threatening to sue in the High Court or County Court). Companies are, in our experience, more likely to respond quickly to a threat of winding up!

Telephone Chasing of Debts

Once a pre-action letter has been sent by us, we recommend that we telephone the debtor on your behalf. The reasons for doing this are:

1. We can verify that the debtor is still trading and has not moved address.

2. We can check that we have the correct details for the debtor in case we need to take legal proceedings on your behalf.

3. We can filter out cases where there is a genuine dispute about the debt or where litigation may not be the best way to resolve the claim.

4. We find telephone collection is a highly cost effective way of recovering debts. Slow payers tend to pay when they receive a telephone call from Solicitors! Our standard charged for telephone calls is £7.50 plus VAT per unit. One telephone call can save all the costs and delay involved in Court proceedings!

5. Our experienced debt recovery team are skilled in negotiating payment arrangements with debtors. They have heard all the excuses before!

 

Information Gathering

Contrary to what some debt recovery firms may tell you, debt recovery should never be an automated process!

We treat each case individually. We place great emphasis on gathering the maximum amount of information about the debtor before we advise you to incur the costs of litigation.

We have an on-line credit checking arrangement with Equifax, one of the World's leading credit reference agencies.

We also have access to information sources which indicate whether the debtor is subject to bankruptcy or winding up proceedings. Why waste money suing a debtor who is already insolvent? We never cease to be surprised at the number of creditors who have spent hundreds of pounds suing a debtor who is already in liquidation or bankrupt!

We can also check Land Registry records to see whether land is owned by the debtor. Experience indicates that a debtor who owns his own house is more likely to pay than a tenant.

We never issue proceedings without discussing a strategy for recovery of your debt with you first. Gathering information before taking the decision to sue is an essential part of the process of formulating that strategy. It ensures that your debt is recovered cost effectively. Where the costs and the risk of litigation outweigh the potential benefit, we will not hesitate to advise you to consider writing off the debt if it is appropriate to do so. Our advice is always commercially driven.

Suing in the Courts

Proceedings are commenced by issuing a Claim Form. Interest on your debt can be claimed at the statutory rate of 8% currently (you may be entitled to claim a higher rate if you have special contract terms or if the Late Payment of Commercial Debts (Interest) Act applies). You will have to pay a Court fee when the Claim Form is issued.

If the debtor pays the debt when they receive the Claim Form, they must also pay your legal costs. We do not charge you anything for issuing the Claim if the costs are paid by the debtor at this stage.

If the debtor files a Defence with the Court, you will have to pay a further Court fee (currently £80.00) and the case will then proceed to a Court hearing.

If we advise you that the Defence is very unlikely to succeed, we may suggest that you apply for Summary judgment. This avoids the need for your attendance at Court. The Court can grant judgment based on documentary evidence alone if there is no triable Defence.

If a Claim is defended, we will undertake all the necessary preparation for a Court hearing or negotiate a settlement as appropriate.

In addition to the cost of issuing the Claim Form, in defended cases we charge for our work at an hourly rate of £122.00 plus VAT.

Enforcement of Judgments

If you have sued in the Court and obtained judgment, you will have a range of options open to you to enforce your judgment. (These options will have been discussed with you by us before proceedings commenced).

1. You can instruct a Bailiff or Sheriff to remove goods that belong to the debtor by what is known as a Writ or Warrant of Execution. (Please note though that the tools of trade of the debtor are protected and that goods on hire purchase cannot be seized).

2. You can obtain a Charging Order on any land, which belongs to the debtor. This means that you become a secured creditor and are likely ultimately to be paid providing there is sufficient equity in the property when it is sold (if the debtor does not pay before that point in time).

3. You can obtain a Third Party Debt Order This enables you to claim against a Third Party who owes money to the debtor. This could be a trade debtor or, more usually, the bank of the debtor (if the bank holds a credit balance for the debtor).

4. As a final resort, you can obtain an Order for Oral Examination of your debtor to find out more about his financial circumstances. This requires him to attend Court and give evidence under cross-examination about his financial circumstances. In practice, the system does not work very effectively and there can be substantial delays before the debtor is obliged to attend Court. We have our own in-house Financial Questionnaires, which we forward to debtors for completion and this is often a more appropriate procedure to use where the debtor is genuinely in difficult financial circumstances but wishes to agree terms with his creditors.

 

Insolvency Proceedings

In appropriate cases, we may advise that winding up or bankruptcy proceedings are the most appropriate method of recovering the debt. While the costs are higher, the potential for early payment in often greater. The threat of being put out of business altogether is often more effective than simply suing in the Courts.

A debtor who is in financial difficulties may well cease trading in a matter of days or weeks. The use of insolvency procedures may result in your company being paid while other creditors are left to write off their debts.

If the debtor is an individual, it is necessary to serve a Statutory Demand first and allow 21 days for payment. In the case of limited companies, a letter giving a few working days notice is sufficient if you have already demanded payment in writing.

Proceedings are commenced by presenting a Petition. The case is listed for hearing and the Petition is then served on the debtor. In the case of limited companies, the Petition has to be advertised in the London Gazette after allowing a minimum of 7 working days from the date of service. The effect of advertisement in the London Gazette is usually to freeze the bank accounts of the debtor thereby making it difficult for them to continue trading.

Providing we recover our costs from the debtor, we make no charge to you for winding up or bankruptcy proceedings. If payment is received after service of a Statutory Demand, we charge you a fixed fee of £40.00 plus VAT.

If you would like to discuss your requirements with us please complete our form