What is Debt Recovery?

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 are ready to step into action to provide their expert knowledge in debt recovery for businesses.

 

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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 including:
  • 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

Chase a judgement through enforcement

Issue a winding-up petition

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Frequently asked questions about debt recovery

What is the process for commercial debt collection?

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 I avoid late payments?

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.

What is considered a late payment?

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.

Can I charge interest on late payments? What are my options?

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.

I am a sole trader. What are my options to recover my debt?

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.

I run a limited company. How can I recover my debt?

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.

What are the alternatives to legal action?

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.

What happens when I issue a claim or if I want to defend a claim against me?

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.

What is a statutory demand?

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.

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Our friendly customer support team are here to help. Call us on 0845 241 1847 or submit your enquiry.

Try Alternative Dispute Resolution instead?

If you would prefer to try Alternative Dispute Resolution, our Mediators are here to help

Why use LawBite?

We're experts in debt recovery - regulated and experienced UK Lawyers

Fully regulated, qualified & insured lawyers give you the widest range of expertise and experience tailored to your needs.

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  • Diane Pearce LawBrief Solicitor
    Diane Pearce
  • LawBrief
    Rebecca Briam
  • Keith Richards, LawBrief Mediator
    Keith Richards
  • Tina Benson
  • Ed Turner, LawBrief
    Ed Turner
  • Richard Valentine, LawBrief
    Richard Valentine

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