It can be incredibly frustrating when your customers, clients or tenants do not pay for the products or services that you have provided for them. Not only does this hurt your cashflow and profits but it can also consume a huge amount of time and resources for you or your employees. In this article we will explain the options available for you to recover monies that are owed.
The first step is to contact the debtor to remind them of the outstanding balance that they owe to you. This can be done by sending letters, emails and/or phone calls and it’s important to keep records of all the correspondence because they may be required as evidence further down the line.
You can also write a more formal letter which is called a Letter Before Action (LBA) warning. In this letter you should clearly state how much money is owed, when you expect is to be paid and what action you will take if they still do not pay.
If you are still unsuccessful then you can take more aggressive actions as follows:
Controlled Goods Agreement
A controlled goods agreement allows for a bailiff company to recover the debt on behalf of the creditor by taking possession of assets, such as equipment and vehicles, which can then be sold at auction.
County Court Proceedings
If your debt is under £200,000, you can apply for court action through the Money Claim Online service or if the amount owed is under £10,000 it can be made through the small claims track of the County Court.
Once a claim has been issued, the Court will serve it on the debtor, who must then acknowledge the claim within 14 days and respond fully within 28 days.
Taking a debtor to court can be costly and time consuming, so you should calculate if the value of the debt is enough to justify the potential expense.
A statutory demand is a formal demand for payment which gives the debtor 21 days to pay. If your debtor does not agree to your statutory demand within 21 days you can start bankruptcy proceedings against any individuals or apply for a winding up petition for a commercial client.
If a commercial client is unable to pay a debt of more than £750, you can petition the court for a winding-up order. If successful, a winding-up order will be issued by the court and this will result in the company assets being liquidated and the business will be removed from the Companies House register.
If you are owed £5,000 or more by an individual, then you can present a bankruptcy petition to the Court. If the court approves the bankruptcy petition, then the debtor’s assets can be taken and sold to pay their debts.
Hire a Debt Recovery Agency
The good news it that there are a number of options for you to be able to collect debt which is owed to you from individuals or other businesses. The bad news is that this can be confusing and take a lot of time. At Positive Collections we can handle this for you and in most cases we can recover your debt before any legal action is required. If you would like to find out more about how we can help you then please get in touch and speak to one of our expert advisors.