Commercial Debt Recovery

What is Commercial Debt Recovery?

Businesses rarely survive if they do not effectively manage their credit control departments. Late payments on invoices can impact your cashflow and damage your business in the short term with longer term impact on your profit and loss.

There are many ways to reduce the amount of bad debt that a business encounters. Below we have listed the main actions that we follow in commercial debt recover. There are statutory requirements upon both the business and the collector when chasing any type of debt and unless these are met you may find that your debt may be unenforceable when attempting to take legal proceeding in your local county court.

IF YOU ARE CONCERNED ABOUT YOUR DEBTORS ABILITY TO PAY AND ARE ALWAYS CHASING THE SAME CLIENTS FILL IN OUR CONTACT US FORM AND WE WILL TALK TO YOU ABOUT YOUR OPTIONS.

We will always make sure that we act within all statutory rules and guidelines when initiating any collection activity to ensure best results.

First contact with debtor

A Pre Action letter will be to prompt urgency i.e. to show the client that we fully intend to collect this debt and use all permissible means at our disposal which may include legal proceedings. This letter is usually sent by fax or post and if required can be hand delivered. All letters will be sent within 24 hours of receiving any instructions to collect the debt owed.

The threat of legal action will in our experience hasten a reaction and if the parameters are met then we may also threaten a winding up petition in the High court or the local county court.

Tele-con with debtor

The second action we will take is a telephone conversation with the debtor. This may prove to be a quick fire way of settling the debt. However, it may also bring to light other issues such as:

• Debtor’s trading address and any change of addresses
• Confirm all details required for any future litigation
• If we feel there is a genuine dispute we will inform you that the debtor intends to dispute the debt and may have a valid claim
• Speaking to a commercial debt recovery expert takes the sentiment of out the relationship that you have with your client. Our experienced debt recovery team are skilled in negotiating payment arrangements with debtors.

Fact-finding

Do you know your customer? If the answer is yes then you have a client who is not paying for services you provided to them. Surely this wasn’t part of your original agreement?

Once we understand your clients circumstances we will decide upon the best strategy to deal with the debt. Each case is individual and not all clients respond to letters and phone calls.

• Assess each case on its own merit and decide upon the best course of action
• If required perform an online credit management check
• Insolvency check on debtor
• Land registry check
• Devise a strategy based on the above and inform you of all the costs

Obtaining a court judgement

If the debt remains unsatisfied you have the option of taking the debtor to court to enforce payment.

A Claim Form will be issued and you can claim interest on the debt at 8% which is the statutory interest charged on late payment of commercial debts. A court fee is payable upon issue of the Claim Form.

The debtor will have usually face two options:

• Pay the debt – if the debtor pays the debt, they will be liable to pay your legal costs.
• File a defence – if the debtor files a defence a further fee is payable by you and the court will issue a date for the court hearing.

If the debtor files a defence hearing we will inform you of the likely chance of success and at this point you may wish to enter a Summary Judgement if the defence has little or no chance of success. This avoids a court appearance and will summarise the how the defence is to be defeated.

If the claim is to be defended your case will be prepared and this may involve a negotiated settlement with the debtor.

Enforcing a judgement

Once you have successfully obtained judgement against the debtor you will then have a number of options in how you wish to deal with the collection of the debt.

Bailiff

A Warrant of execution gives the Bailiff power to enter the property of the debtor and remove goods that belong to the debtor. There are certain items that cannot be taken, however the debtor will have to prove items that he feels are either on hire purchase or tools of trade.

Charging Order

This will grant you security against your debt and will ensure you are paid in full plus statutory interest at 8% once the land or property has been sold. This will only apply if the debtor has sufficient equity in the property.

Third party Debt Order

This is a claim against a Third party who owes money to the debtor. This could be trade debtors or the bank if they hold a balance on their account.

Oral Examination

An order can be obtained for an Oral examination at court which will force the debtor to attend court and explain his/her financial circumstances. We may avoid this by requesting the debtor sends details of their financial circumstances to us so that we may assess the best course of action for the collection of the debt.

Insolvency Act 1986

Bankruptcy and Liquidation are remedies available to a creditor if:

• The debt is over £750.00
• The debt is not disputed
• The debtor is a sole trader or Limited company

Bankruptcy or Liquidation can offer quicker payments than court settlements. There is a fee payable to the courts and a fee payable to initiate winding up orders or a creditor’s petition.

Individuals

The service of a Statutory Demand will be required first and allow 21 days for payment. Proceedings are commenced by presenting a Creditor’s petition. The case is listed for hearing and the Petition is then served on the debtor.

Limited Company

A letter giving a few working days notice is sufficient if you have already demanded payment in writing.In the case of limited companies, the Petition has to be advertised in the London Gazette after allowing a minimum of 7 working days from the date of service. The effect of advertisement in the London Gazette is usually to freeze the bank accounts of the debtor thereby making it difficult for them to continue trading.