Debt recovery

Debt recovery

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In business one is often faced with the problem that people buy on credit and then fail to pay what they owe on time. This places a strain on the finances of the business and effective steps need to be taken to make sure the business doesn?t fail because it has too many defaulting debtors. We discuss a multitude of ways available respectively in England and Wales, and in Northern Ireland, in which debt can be recovered ranging from initial reminder letters and debt payment agreements to the more serious steps that can be taken through the courts.

Debt recovery in England & Wales

Firstly, the debtor, whether a private individual or another business, should be sent a series of letters setting out all the facts surrounding the debt and the actions that will be taken if the debt is not repaid. Hopefully the debtor will pay the debt after you have taken these initial steps.

However, if you have to take the matter to court to recover your money, it is advisable that you first make use of alternative dispute resolution (ADR). In the ADR process you will try to come to an agreement as to how the debt can be repaid. If the debt is disputed you will try to clarify the issues by exchanging information. One form of ADR is mediation in which an independent person assists both the creditor claimant and the debtor to try and find a quicker and cheaper route to resolve the claim instead of a formal court hearing. Both parties have to agree to this ADR process. The bonus is that if you can solve the issue in this way you are also more likely to retain the business relationship with the debtor. If an agreement is still not possible then you will aim through the ADR process to at least agree what issues are in dispute so that the court proceedings can be limited to those.

If you can?t settle the matter in any other way, you may want to make a claim in court. It?s always advisable, however, to seek independent legal advice before doing so.

Alternatively, if you believe that the debtor is unable to pay your claim and the amount of the debt meets the insolvency level , you could serve the debtor with a statutory demand in anticipation of applying for the debtor?s bankruptcy (if an individual) or liquidation (if a company).

Debt recovery in Northern Ireland

First steps to collect the debt

Firstly, the debtor, whether a private individual or another business, should be sent a series of letters setting out all the facts surrounding the debt and the actions that will be taken if the debt is not repaid. Hopefully the debtor will pay off the debt that they owe to you after you have taken these initial steps.

However, if you have to take the matter to court to recover your money, it is advisable that you first make use of alternative dispute resolution (ADR). In the ADR process you will try to come to an agreement as to how the debt can be repaid. If the debt is disputed you will try to clarify the issues by exchanging information. If an agreement is still not possible then you will aim through the ADR process to agree what issues are in dispute so that the court proceedings can be limited to those issues.

If you can?t settle the matter in any other way, you may want to make a claim in court; it?s advisable, however, to seek independent legal advice first. Before making a claim in court, however, it?s important to remember that:

  • If your case fails and the court rules against you, you could be liable for your debtor?s costs as well as your own. Should your claim be issued in the Small Claims Court, your legal fees are not recoverable.
  • if the debtor defends the court action you will need to prove the facts supporting your claim, such as invoices, receipts, written agreements or other documents