Debt Recovery – how to get paid

Debt Recovery – how to get paid

Recovering your debts can be a frustrating and sometimes difficult part of running your business, especially if you are managing this in-house without legal assistance.

This guide will help you understand the process that your Rix & Kay debt recovery lawyer will take when helping you to recover your outstanding debts.

Letter Before Action

The first step in recovering your debt will be for your lawyer to draft a compliant Letter Before Action (LBA) to the debtor. The LBA will have to adhere to the Pre-Action Protocol for Debt Claims for debts against an individual or the Practice Direction for Pre-Action Conduct for business debts.

The LBA will detail the debt including the amount of and reason for the debt. It will also include the amount of interest that is due and accruing. The LBA also confirms your intention to issue legal proceedings should you not receive payment. Your debtor will then have a set period to respond to the LBA. They can either provide a letter of response confirming their intention to dispute the claim or clear the debt. If they dispute the claim or do not respond, your lawyer will then move to step 2.

It is worth noting that an LBA action is often enough to prompt a debtor to pay. Once the debtor sees that they are facing legal proceedings and that you have referred the matter to a lawyer, they will often either pay or offer a payment plan. If this happens, the further steps need not be followed.

Legal Proceedings and CCJs

If an LBA does not result with the debtor paying the debt, the next step would be to issue proceedings against the debtor. Your lawyer will prepare the papers to file with the Court alongside the relevant evidence.

In the case of smaller debts, your lawyer may deem it appropriate to deal with the matter through Money Claims Online which can be quicker, easier and cheaper. In other cases, your lawyer may file a claim with the County Court.

The debtor will then have 14 days to file an acknowledgement of service, whereby they will state whether they admit the claim, or intend to defend the claim.  If they intend to defend the claim and they file the acknowledgment of service, they will have 28 days from the service of the claim to file a defence. If the debtor fails to file an acknowledgment of service or defence, your lawyer may request judgment.

If the Court rules in your favour, they will make a County Court Judgment (CCJ) against the debtor. This is an order of the Court that confirms that payment is due to you and that the debtor has failed to make such payment. A CCJ will be recorded against the debtor’s credit record and may cause issues in the debtor obtaining credit in the future.

Enforcement

On some occasions, your debtor may still fail to pay the monies due to you, despite the CCJ. At this point, Rix & Kay can advise you on your enforcement options.

The law provides many avenues for you to enforce a CCJ. Your lawyer will advise you on the best option for you depending on the specific profile of the debtor. For example, should your debtor own a property, our debt recovery team may advise that a charging order against the debtor’s property is the best option.

Please check out our article on enforcement options for further information.

Contact us

Rix & Kay’s Dispute Resolution team are very experienced in debt recovery and helping you get paid. We can take away a lot of the stress involved in the process.

If you are currently dealing with your debt recovery process in-house, contact Richard Ludlow, Partner and Head of Dispute Resolution, via e. RichardLudlow@rixandkay.co.uk or t. 01732 441 695, or Jordan Ismail via e. JordanIsmail@rixandkay.co.uk or t. 01732 441 721.