From time to time, you will encounter customers who sometimes fail to pay for the goods and/or services that you provide. This can be very frustrating and can impact the cash-flow of your business. It is, therefore, important to ensure that your debts are monitored closely and action is taken against late payers promptly as and when necessary.
If you have a difficult customer who is unwilling to pay for the goods or services that you have provided, you may have to bring a legal claim to recover the monies outstanding.
How to pursue a debt?
Your Credit Control
The first step to recover debt is to follow your internal credit control procedure. All businesses should have a procedure in place that monitors all overdue debts. Once your internal credit control procedure has been exhausted, you may then consider taking debt recovery action, if the debt remains outstanding.
Is your customer an individual or business?
You must then consider whether the customer is an individual or a business. The answer to this question will determine whether the newly introduced Pre-Action Protocol for Debt Claims, which came into effect on 1st October 2017, should be adopted. This Protocol applies to recovering sums from individuals.
The letter of claim
The next step is to issue a letter of claim to the debtor. The letter of claim must include, for example, the amount of debt, any interest added to the debt, how the debt came about and, where necessary, the required forms prescribed by the above Protocol (if applicable).
The debtor will have a set amount of time in which to respond to your letter. If a response is not forthcoming, you can then issue a claim against the debtor in the County Court (unless the debt is over a £100,000, in which case, you will issue the claim in the High Court).
You will need to send your claim to the County Court Money Claims Centre. There is also facility to file a claim electronically. You can include statutory interest on your claim or any other reasonable interest rate as per your own terms and conditions.
Judgment and enforcement
If you still receive no payment or acknowledgement from the debtor, you may then apply to the court to seek default judgment. Once judgment has been obtained, you then have a range of options for enforcement including instructing bailiffs, obtaining a charge over the debtor’s residential property and obtaining an attachment of earnings order against their monthly salary.
What Farnfields can do to help?
Our Debt Recovery Team has experience in successfully recovering debts owed to both businesses and also to individuals. We can take away the stress and hassle of dealing with debts and debtors, which allows you to get on with the day-to-day running of your business!
We offer a Fixed-Fee Debt Recovery service for simple, uncontested debts up to the value of £10,000. Depending on the debt amount, our fees can start at just £50 plus VAT to send a letter of claim to the debtor. Further fixed fees are agreed for any subsequent steps.
A well constructed letter of claim can often lead to payment of outstanding debts.
If you would like any further information, please contact our Dispute Resolution team on 01747 825432 or firstname.lastname@example.org.
Website content note:
This is not legal advice; it is intended to provide information of general interest about current legal issues