Outstanding debts can have a huge impact on a business. If you have provided a service to someone, or sold a product and not been paid, attempting to recover what you are owed often requires a significant amount of time, money and resources.
This can be extremely detrimental to a business. Diverting the focus away from its usual practices to chase outstanding debts can quickly take its toll on a company’s operations and eat into its cash flow. In situations where the pursuit of monies owed proves fruitless, the consequences can be even more devastating.
In this blog, our Debt Recovery Solicitors discuss the key stages involved in recovering commercial debts and consider what a lawyer can do to help.
What are the main stages of debt recovery?
There are three main stages involved in the debt recovery process.
1. Letter before action.
The first stage in commercial debt recovery is for the creditor’s debt recovery solicitor to draft a letter before action (also known as a ‘letter of claim’) to send to the debtor. This should set out the amount owed and lay out the details of the claim, along with the intention to start court proceedings if the debt remains unpaid.
This is a crucial first step in the debt collection process and should be handled carefully. A well-drafted letter before action can result in the swift recovery of the debt, but any mistakes made at this stage could not only result in the debt remaining unpaid, but also cause major issues later on.
At Larcomes, our specialist debt recovery solicitors can help. Our professional commercial debt collection lawyers have extensive experience drafting letters of claim for various businesses in Portsmouth and the surrounding areas.
Our professional team take care to ensure the letter of claim is clearly drafted and includes all the relevant information. Any discrepancies between what is stated in the letter and what is later claimed in court could cast doubt on your position and have serious consequences.
We normally find that a strongly worded letter before action is sufficient in most cases to recover the monies owed. However, should this not result in payment, our debt recovery lawyers will explain the next steps available to you, finding you the most appropriate solution to recover the debt.
To speak to one of our experienced commercial debt recovery solicitors in Portsmouth and Waterlooville, call 023 9244 8100 or click here to make an online enquiry.
2. Dispute resolution process.
Should a letter of claim not result in the debt being settled, our solicitors will then discuss with a creditor the various dispute resolution options available.
Pursuing a claim through the courts can be time consuming and costly, and it is usually advisable to consider alternative dispute resolution (ADR) solutions, such as negotiation, arbitration and mediation, wherever possible.
When parties manage to reach a consensus through ADR, the terms of how the debt will be repaid can be formalised in a settlement agreement, which your solicitor will draw up.
However, if dispute mediation is not the right course of action for you, our commercial litigation solicitors have the skills and experience to achieve the best outcome for our clients by obtaining county court judgments (CCJs) at trial.
A CCJ is a Court Order that confirms that the debtor is liable to pay your debt and enables you to take enforcement action against the debtor to recover the debt owed to you.
Debtors who receive a CCJ have it placed on their records, which can negatively impact their credit rating and make it more difficult for them to get credit or loans.
3. Enforcement action.
Once a CCJ has been obtained against a debtor, you are entitled to ‘enforce’ that judgement immediately and take the relevant steps to collect your debt.
There are various debt enforcement options available to creditors, including an attachment of earnings order (a court order that allows a creditor to deduct money from a debtor’s wages to pay a debt), or a charging order, which is a court order that secures a debt against a property.
Most creditors chose to instruct a bailiff or High Court Enforcement Officer to visit the debtor’s address and collect the debt or seize goods to the value of the debt.
In some situations, businesses owed money may look to start bankruptcy proceedings against an individual or organisation to enforce a CCJ and recoup their monies owed.
Our debt recovery enforcement solicitors will explain the different debt collection and enforcement methods available to you and we will use our experience and expertise to find you the most appropriate solution depending on your particular circumstances.
Can I recover interests and costs from my debtor?
Yes, you can claim interests and debt recovery costs if another business is late paying for good or services.
If you agree a payment date, it must usually be within 60 days for business transactions. Business can agree a longer period than 60 days, but it must be ‘fair’ to both businesses.
If you do not agree a payment date, the law says the payment is late 30 days after either:
- The customer gets the invoice.
- You deliver the goods or provide the service (if this is later).
If no interest rate for late payments are set out in a contract, businesses can charge another business ‘statutory interest’ if they are late paying for goods or a service, which is 8% plus the Bank of England base rate.
Find out more about the rules for late commercial payments on Gov.uk by clicking here.
Debt Recovery Solicitors Portsmouth
At Larcomes, our Debt Recovery and Enforcement solicitors in Portsmouth and Waterlooville have the knowledge and expertise to help recover any outstanding debts.
We will explain all the options available to you, ensure you are aware of the costs involved, and guide you through every step of the debt recovery process.
In most circumstances, for undisputed debts of under £25,000, we can offer fixed-fee legal solutions to recover the monies owed to you.
For more information on our fees and other costs involved, please click here for our debt recovery service costs.
If the amount owed to you is over £25,000 or you are based outside the UK, please get in touch with our specialist litigation team, who will be able to assess your case and provide further information on the services available to you.
Our debt recovery expertise covers all areas of commercial and private debt, debt collection and enforcement for both individuals and businesses.
To speak with one of our specialist Debt Recovery team, please call on 023 9244 8100 or make an online enquiry for a no-obligation assessment of your case.
Please note that this article is not intended to be legal or professional advice. It is for general guidance only, and updates to the law may have changed since it was published.
