Debt advice - what you need to know about debt recovery

Unpaid debt and late payments cause significant cash-flow problems for all businesses and can create disputes which negatively impact business relationships. 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, whether it is a small debt recovery claim or a significant amount of money.

Debt recovery services - how to recover your owed debt

There are several ways you can get debt legal advice to recover money that is owed to your business. If your business is owed money by others, LawBite’s expert Dispute Lawyers are available to provide you with the best business debt collection advice and guide you through your options regarding debt recovery.

At LawBite, we understand that legal action to recover debt needs to be affordable, efficient and effective which is why our expert dispute lawyers and solicitors are ready to step into action to provide their expert knowledge and debt recovery legal advice to help you ensure you know your legal options to recover money. 

Debt recovery process 

Whether your business needs advice for a small debt recovery or is owed a significant amount of money, LawBite’s expert Dispute Lawyers are available to give you the best expert debt legal advice and guide you through your options regarding your business debt recovery process.

Below are the steps our lawyers may take you through during your business debt recovery process. If you have any questions or want to find out more about our legal support services for debt collection, contact us today.

Letter Before Action

Before you begin any legal action to recover debt, there are several actions you can take to give you the upper hand during the business debt recovery process. A Letter Before Action is always the first step and precedes any legal proceedings. The letter formally sets out the details of your debt collection 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 for business debt

When you take legal action to recover debt, your claims are heard by a county court. The business debt recovery process here tends to be more streamlined and with cheaper court fees compared to the High Court. Our professional debt recovery solicitors can support your business with debt recovery in the UK by helping you prepare your claim and providing support during court proceedings.

The Small Claims Court deals with claims under £10,000 in value. If your claim is more than £10,000 in value, we can support you with alternative legal action to recover your debt.

Defend a claim at a Small Claims Court Trial

If you are the recipient of 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, and make the most of your case. LawBite’s expert lawyers will help you try and resolve the matter through negotiation or business mediation, or appear on your behalf in Court. Find out more about how we can help you manage your business disputes.

Chase a judgement through enforcement

If you win a judgment but the other side refuses to pay the debts you are owed, LawBite’s lawyers and solicitors can offer you further legal advice on debt recovery and help you to get the debtor summoned to appear in Court to be questioned. This may prompt payment or even consider sending in bailiffs to seize and sell the company’s goods for judgments up to £5,000.

Issue a winding-up petition

This device 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 give you debt legal advice on how to help you issue a Petition, which will be 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. This may allow you to recover a small amount of the debt if there is enough to go around to pay all creditors involved. 

How long before a debt is written off?

If you’re looking at business debt recovery in the UK, in most cases of unpaid debt the money is written off after six years. This is not the case for all debts as some have varying limitation periods, but if you use LawBite for legal advice on debt recovery, our expert lawyers will be able to advise on when the debt will be written off. 

However, it's important to understand that if your business is owed money, once the time limit has passed the debt still exists, although it is no longer enforceable so court action cannot be taken against the debtor. Even though the debt is statute-barred, you can still contact the debtor to attempt to recover your debt if your business. However, if your company is authorised and regulated by the Financial Conduct Authority (FCA), you will need to follow the debt collection guidelines

Debt recovery rates

Navigating the debt recovery process can be complex, but with the right legal advice, you can have the best chance of successfully recovering the commercial debt owed to you. 

At LawBite, we provide affordable and transparent legal advice, so that you always know what you’re paying for. For debt recovery services we charge £255 per hour with a minimum of 7 hours per matter. To learn more about our rates, please click here.

If you’d like to discuss your debt recovery matter with one of our expert dispute lawyers, book a free 15 minute consultation today.

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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.