Commercial Debt Collection
Businesses that get into difficulties with cashflow can face a very uncertain future. One of the main reasons for cashflow problems is a failure of customers/clients of a business to pay their bills on time. This issue has, of course, become particularly stark with the present COVID 19 crisis. The need for business to successfully collect in debts has never been more important.
Here at Band Hatton Button we have an excellent team of lawyers who can help businesses recover what they are owed. Below we explain some of the methods at our disposal.
1. Applying for a County Court Judgment
When a business is owed money by another business or an individual it can send a letter of claim to that debtor. Where chasing an individual or a sole trader the letter of claim must allow a debtor at least 30 days to respond under what is known as the 'Pre-Action Protocol for Debt Claims'. If no response to that letter is received and no agreement with the debtor can be reached, then a claim can be made for recovery of that debt through the local County Court by way of an application for a County Court Judgment ('CCJ').
A CCJ will go onto a debtor's credit file (as held with credit reference agencies) and this can badly damage that business's ability to obtain credit. Often the simple threat of a judgment alone is usually sufficient to persuade a debtor to reach an accommodation to pay the debt in full or by way of an out of court settlement. However, it is also common for a debtor to refuse to satisfy a CCJ once obtained. How can you then recover what is owed? Well, there are a variety of enforcement measures available as follows:
- Court bailiffs can be appointed to seize and sell assets of the debtor. A standard county court bailiff can be used but so can a High Court Sheriff who has greater powers of enforcement;
- A Charging Order against any property owned by the debtor can be applied for. Once a charging order is obtained then a further application to court can be made to sell the property to realise the sums due under the CCJ;
- A Third-Party Debt Order which freezes a debtor's bank account pending a Judge deciding how much can be taken from that account to satisfy the debt;
- An attachment of earnings Order where money is received from the debtor's employment earnings;
- The service of a Statutory Demand upon the debtor with a view to making the debtor bankrupt or winding up a company (see below)
2. Bankrupting a Debtor/Winding up a Company
If the debt in question is greater than £5,000 if owed by an individual or £750 if owed by a company, a debtor can then be served with what is known as a Statutory Demand which is a legal document formally demanding the debt in question. The failure to pay this sum within a statutory time frame allows a creditor the ability to apply to court to bankrupt the debtor, or in the case of a company, wind it up in the High Court. The threat of bankruptcy/winding up is usually a very effective tool to recover debts. However, the debt in question must clearly be undisputed for this avenue to be used effectively. Where a debt is disputed on what appear to be more than just fanciful grounds then bankruptcy/winding up procedures should not be used. In addition, if it appears that the debtor has no money or assets for liquidation then bankruptcy/winding up will usually be a pointless exercise. It is important therefore to be sure the debtor has sufficient funds/assets before embarking on this route or indeed using any enforcement measures.
3. Alternative Dispute Resolution (ADR)
ADR is an increasingly popular way of resolving many debt disputes. It can take the form of a simple round table meeting of the warring parties. Alternatively, a professional mediator can be hired by both parties to try and broker a settlement. Band Hatton Button also has its own in-house mediation service. Mediation is usually much cheaper than going to court and is less adversarial meaning that once the dispute has been resolved the parties are often still in a position to continue to do business together. It can help maintain business relationships that might otherwise be damaged beyond repair by litigation.
The procedures involved in recovering debts are complex and therefore specialist legal advice is required. We specialise in recovering any debt greater than £5,000. Our debt collection and ADR team is dedicated to trying to achieve the best possible outcome for you.
We operate a fixed fee structure for the initial stages of the CCJ process which can be downloaded using the following link (ADD LINK).
The costs of enforcing CCJ's and using bankruptcy or ADR procedures are negotiable depending upon the size of the debt and complexity of the issues.
If you have a debt that you are having problems in collecting please contact John French, Eamon Sullivan or Jack Austin-King on 02476 632121 and an appointment can be made to discuss the best way forward.