Debt Recovery - what you need to know

Unpaid debt causes significant cash-flow problems for all businesses.

No one wants to spend their time chasing invoices instead of growing their business. However, owed debt is a reality that most companies have to contend with. When a business is owed money there are a number of ways that legal help can provide valuable assistance in recovering this debt.

At LawBite, our expert dispute lawyers and solicitors are ready to step into action to provide their expert knowledge in debt recovery for businesses. 

How to recover your owed debt

If your business is owed money by others there are a number of ways you can go about recouping your debt.

There are several legal ways you can act and our expert Dispute Lawyers are always available to guide you through your best options.

Letter Before Action

A Letter Before Action is always the first step and precedes any legal proceedings. The letter formally sets out the details of the claim:

  • An explanation of the basis on which the claim is made
  • A summary of all facts relevant to the claim
  • Details of exactly what you are seeking as claimant from the defendant

Submit a claim to the Small Claims Court

These are heard by a county court. The process here tends to be more streamlined and with cheaper court fees compared to the High Court. The Small Claims Court deals with claims under £10,000 in value.

Defend a claim at a Small Claims Court Trial

If you receive a claim it is important that you act quickly and do not ignore it. We can help you respond to the Court within the 14 day time limit, make the most of your case, help you try and resolve the matter (through negotiation or business mediation) or appear for you in Court.

Chase a judgement through enforcement

Sometimes you can win a judgement, but the other side doesn’t pay it. If that happens we can help you ensure that you recover your debt by having the debtor summoned to appear in Court to be questioned, which may prompt a payment, or even (for judgments up to £5,000) consider sending in bailiffs to seize and sell the company’s goods.

Issue a winding-up petition

This is a device that can be used when an insolvent company fails to repay a debt of more than £750 which has gone unpaid for at least 21 days. We can help you issue a Petition, following which it is advertised in a publication called ‘the Gazette’. Unless the Winding up Petition is successfully opposed the Company can be compulsorily liquidated. This will bring the company to an end and its assets will be liquidated for the benefit of all those it owes money to. This may help recover your debt, or part of it, if there is enough to go round to pay all creditors involved. 

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We believe that great legal advice is a fundamental business right. We are committed to providing your business with expert legal advice that is:
 
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Many businesses find traditional law cumbersome; complex to navigate, difficult to navigate and often full of hidden charges. Therefore, it is no surprise that SMEs instinctively turn to LawBite to solve their business legal problems, giving us a 98% service rating on feefo.
 
LawBite online lawyers and online solicitors provide expert legal advice on all commercial and business matters. Book a no commit 15-minute call with our friendly lawyers today or learn more by joining LawBite for free.



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Frequently asked questions

LawBite is the modern way for SMEs to get the high quality legal advice they need, but faster and cheaper.

As we look to revolutionise the traditional legal process, this may raise a number of questions on how we operate to provide your business with legal advice for your business that is; easier to access, clearer to understand and more affordable.

We have brought together the most frequently asked questions from our customers.

A Statutory Demand is a demand for payment where the debt is not being disputed. If you do not pay the debt in full by the expiry date on the Statutory Demand you will be deemed to be unable to pay your debts as they fall due and the creditor can then apply for your bankruptcy if you are an individual or a sole trader, or for a liquidation if you are a limited company.

The Court will send you instructions on what you must do and by what date. It is important that you do exactly as the court instructs you and that you do it correctly. Any mistakes could prove to be costly. There are a lot of steps the parties have to take even before a case goes in front of a judge. If you contemplate legal action or have to defend a claim against you, you must decide if you want legal representation or not.

Alternative Dispute Resolution could offer an alternative to legal action in appropriate cases. For example Mediation, Adjudication or Arbitration. In some industries you can also refer disputes to specialist Ombudsman schemes.

Most commercial debts will be caught by the Late Payment of Commercial Debts (Interest) Act 1998. This means that even if an invoice is paid one day late, the consequences of the act will be triggered. The Creditor will be entitled to interest of 8% above the Bank of England Base Rate, compensation of between £40 and £100 per invoice, compensation for time spent chasing payment and reasonable costs of obtaining payment.

Sole traders are also covered under the Late Payment of Commercial Debts (Interest) Act 1998 and your options would be the same as any other business, no matter what the size of the business or the size of the debt you are trying to recover.

Yes you can. If you agreed a percentage of interest at the outset with the debtor you will be entitled to charge interest at the agreed rate. If no agreement was made to pay interest on late payments, you can still claim interest under the Late Payment of Commercial Debts (Interest) Act 1998. You can either start recovery proceedings yourself, instruct a debt collection agency or instruct solicitors to assist you with the process. Paying a solicitor to help you will give you the best chance of getting paid but there is a cost to this and you may not be able to recover your legal costs in certain circumstances.

Most commercial debts will be caught by the Late Payment of Commercial Debts (Interest) Act 1998. This means that even if an invoice is paid one day late, the consequences of the act will be triggered. The Creditor will be entitled to interest of 8% above the Bank of England Base Rate, compensation of between £40 and £100 per invoice, compensation for time spent chasing payment and reasonable costs of obtaining payment.

Late payment is unfortunately a commercial reality and part and parcel of running a business. However, any business should ensure that clients who pay late are not allowed to accumulate large amounts of debt before any action is taken. The best way to protect your business is to take action as soon as possible. It goes without saying that having proper contracts and record keeping in place will go a long way to assisting a business if they do have to take legal action against late payers.

Debt collection usually starts with a pre-action letter, also called a letter or demand. The purpose of the pre-action letter is to give both parties an opportunity to state their cases at an early stage. Once the parties have completed the pre-action stage and failed to settle matters amicably the Creditor can issue a debt claim at court if the debt is disputed or start bankruptcy proceedings if the debt is undisputed. Once the matter has been heard by the court and the court gives a judgment in favour of the creditor, the creditor can start enforcement proceedings.

How can LawBite help?

Our LawBriefs can provide expert guidance and reassurance, whether you are bringing or defending a legal claim, or resolving a dispute using Alternative Dispute Resolution (ADR) methods like Mediation and Arbitration.

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