How to recover a commercial debt
Covid-19 has undoubtedly had a massive impact on the operation of businesses in the UK. Some have been left with very little to spare, which has hurt their operations and ability to grow. Recovering debt can be a time-consuming and stressful process for an organisation that is already facing repercussions from the pandemic. Data taken from Sidetrade showed that in March 2020, the rate of unpaid invoices increased by +23% as a result of the UK leaving the EU as well as the pandemic. Our firm can help you maintain business relationships by exploring an effective but sympathetic approach to your debts.
How long is the process?
Debt recovery can take as little as 24 hours to a few weeks to recover, in some cases longer depending on the nature of the debt and the amount involved. Using a third party such as a law firm can increase the chances of your debt being recovered as it puts pressure on debtors to pay up.
If pursuing action through the courts, it can take up to 30 weeks for a case to go to trial and extra time depending on whether the debt is disputed.
The steps involved
- Check if adequate time has passed before taking action. You may wish to speak with the debtor personally and check any existing contract to allow them the opportunity to repay the amount owed.
- Send a letter to remind the debtor by stipulating a deadline by which they must pay the outstanding balance. This can be used as evidence should the matter be taken to court and so it is essential for all communication to be in writing, particularly to avoid any misunderstandings.
- A Letter Before Action (LBA) is an official letter that ought to be sent to the debtor before court proceedings are started. Complex set of rules govern what needs to be included within LBA and it is advisable to speak to an experienced solicitor before it is sent.
Usually a LBA is highly effective in retrieving payment as it is a formal letter by a law firm and more likely to receive a response.
- If the LBA does not work, the last step is to take the debtor to court and start proceedings against them. Although this is the quickest way to ensure that the money owed is returned, it can become a costly and lengthy process if there are large amounts involved or if the debtor does not have enough money to repay the creditor.
Once a judge grants a County Court Judgement, but the debt remains unpaid the creditor usually has several options to recover it, including:
- A charging order- This is the most common method of recovering debt and involves an order being made against the debtor’s property, shares and assets.
- Control goods agreement- Here the debtor agrees to grant the creditor control over certain goods for a fixed amount of time. If the debtor defaults, they risk losing ownership over these goods which are then put up for sale and the proceeds given to the creditor.
- Winding up order- This is where the court appoints a liquidator to recover any assets that are still owned by the debtor in order to obtain as much money as possible to cover the debt.
How we can help
We have an experienced team who can help you in recovering debt in as little time as possible and working in your best interest. We work closely with you and provide updates on each stage of the process to allow you to make the right decision. Click here to find out about our incredible and competitively priced subscription service for businesses.
This article is for information purposes only and does not constitute legal advice. Call us today on 01244 478 730 to book free consultation.
