02/10/14 Debt Recovery - When should you consider legal proceedings? 

All companies incur debts and no matter how good your debt procedures are, there will come a time when you just can’t recover the sum owed by a debtor. So what are the options? 

“Sometimes just one letter on solicitor headed notepaper is enough to result in payment or, at the very least, the opening of a dialogue about the debt with the debtor,” says lawyer and debt recovery specialist Richard Ludlow. 

“The alternative is to start your own claim using Money Claims Online, the HM Courts & Tribunals Service’s internet-based claims service. However, while this option is cheap and potentially cost-effective, it doesn’t always achieve the results you want,” adds Richard, an associate and head of insolvency and debt recovery at leading Kent law firm Furley Page. 

“There’s a lot to be said for instructing solicitors to send a letter before any action because in the vast majority of cases it will produce settlement before the claim even gets to court. In fact, in straightforward debt recovery cases (e.g. recovery of monies on undisputed unpaid invoices) a hearing is usually very rare. 

“Either the debtor won’t defend the claim or, if they do initially, they will quickly come to an agreement over the debt to avoid incurring costs, which may be considerable,” adds Richard. 

Once there is an agreement about how much one party will pay the other, the most important part of the process, enforcing that agreement, begins. This is vital because all you will have at this stage is a piece of paper (Court Order) which says that the debtor must pay you the money – and unfortunately, as many people discover, this does not mean that the debtor will simply pay you. 

You can, however, use one or more of the following methods to enforce the Court Order, whether handed down by the court or agreed by the parties: 

  • instruct a High Court Enforcement Officer to attend the debtor’s premises and attempt to recover monies
  • apply for a Third Party debt order which, if ordered by the court, results in monies being removed direct from the debtor’s bank account; or
  • apply for a Charging Order, which ends in the sum you are owed being secured against the part of the property owned by the debtor

 “Instructing your solicitor to make sure you utilise the most appropriate and cost-effective method will ensure the maximum chance of recovery,” says Richard. 

“Taking control of the process as early as possible will give you the best chance of success. If you do nothing then the chances of a positive outcome are reduced dramatically. Having said that, taking action at any time is better than taking none at all.” 

Furley Page offers a fixed fee debt recovery service and is happy to discuss your specific problems and provide a bespoke debt recovery package. 

For further details, contact Richard Ludlow on 01634 828277, email him at rpl@furleypage.co.uk or visit www.furleypage.co.uk