If you’ve found yourself losing track over how many reminder letters and phone calls you’ve made trying to chase late payments, it might be time to investigate the kind of legal action you can take to start recovering debts.
While it is vital to strike a careful balance between a good relationship with clients and receiving a prompt payment for any goods or services you provide, in some cases it will be necessary to take legal action to ensure you receive the money you are owed. Many smaller businesses struggle with late payments and any missed invoices; therefore, getting the right advice and support is vital.
At oraclelaw.com, we provide expert services for debt recovery – from simple invoice recovery to important building contracts and loans.
In this article, we will explain the kind of legal action open to you when it comes to recovering debt and give you an idea of how you can take control of the situation you’re faced by when it comes to debt.
The Initial Step – Late Payment Reminder Letter
The first step you can and must take is to send to the client a late payment reminder, making clear to them that a payment is due and that they must pay the debt as soon as possible. You can follow this up with further letters making more forcible demands – usually within a set period of seven days. Failure to get a response to these letters should prompt you to send a formal letter making clear that you will issue a court proceeding to recover the money.
These letters should,
- Make clear just how much you’re owed
- What the money is for
- And what you have already done to try and secure the money
A letter should also include the following information
- Who is involved – for example, the names and addresses of yourself and the person who owes you money
- Properly dated copies of all relevant paperwork regarding the debt
- A date you expect the payment to be made by – usually within seven days
- A request for the debtor to explain any issues or disputes they have with your claims
- A clear statement of any steps you plan to take if the payment is not received
This approach is vital. You should always speak with the debtor or attempt to engage with them first before any contact is made.
Letters maximise the prospects you have of recovering the legal costs at the conclusion of the matter – but remember, there’s strict rules governing the kind of information that’s provided to debtors.
No response?
If you do not receive a response and the debt goes unpaid, then there are two options – court action or insolvency proceedings. You should be very careful before either of these is taken, and remember to consider,
- An overall cost-benefit analysis: is this going to be worth it?
- Are you likely to secure the payments via court action?
- How will this impact your future commercial relationship with the client?
- How much will taking legal action cost?
Mediation
Mediation is a good approach, and most courts will expect you to have undertaken mediation.
Either via a solicitor or debt recovery agency, you can attempt to mediate the situation. A solicitor will, for a fee, write a letter to the debtor and make clear that legal action will follow. A solicitor’s letter is often enough to end the matter, while a solicitor or debt recovery agency can give you fantastic legal advice on the matter.
Oracle Law can provide you with superb mediation help in handling the recovery of your debt.
If mediation fails, court action is often the next step.
Court Action
You can make claims against either an individual debtor or a commercial debtor. This requires the filling out of forms (which often necessitates the help of professionals) and the claims will be issued by the court to the debtor. The debtor can respond if they choose to and attempt to defend themselves.
If a claim is for less than £10,000, it is likely to take a lot longer for actions to proceed and furthermore, it is unlikely only the court fees and actual limited fixed costs will be recovered.
Enforcement
If a debtor doesn’t respond to a court claim or refuses to make the payment after the judgement has been obtained, it’s possible to take further action. This includes,
- An execution order against goods which are owned by the debtor
- An attachment of earnings order – diverting money directly from wages or earnings to pay back a debt
- A charging order, which means if any property is sold by the debtor, the proceeds will be used to pay off debt
Insolvency Proceedings
A commercial client who cannot pay back a debt of over £750 can be subject to insolvency – the threat of which often can force a debtor to pay immediately. If it is a commercial client, the company may go into liquidation and a debtor can be entitled to a dividend. Individual debtors may declare bankruptcy if the debt they owe is more than £5,000. In this case, their assets may be taken to pay the debts they have.
Oracle Law – Here to help
There’s a huge amount to navigate when it comes to recovering debt and a lot to try and deal with all on your own. Oracle law can help resolve the issue in the quickest, cleanest manner possible.