If someone owes you money (be it an individual or a business) then you will need to consider what to do next.
In some circumstances, it is best to just put it down to experience otherwise you could be throwing good money after bad. This will usually be (1) when the amount owed is very small or (2) a business is involved which is insolvent or where the person who owes you the money is receiving benefits. In these situations the chances of actually recovering any money is slim, although it may be that as a point of principle you want a judgment against them. This is especially true if you have reason to believe the debtor’s circumstances may change in the future.
What steps should you take?
In the majority of situations it will be worth taking steps to recover the debt and there are numerous ways to achieve this.
The most common route people take is to issue a claim (small claim if under £5,000), however, there is an alternative, you can also issue a statutory demand.
Issue a claim
If you wish to use the most common route, you obtain judgment and then enforce using one or all (you can use all methods simultaneously) of the following as appropriate:-
Attachment of earning order – Where the Court tell the person’s employer to pay you an amount out of their earning each pay day until the debt is paid off;
Third party debt order – If you know that a third party owes the debtor money (this includes banks which have a credit balance), the Court will tell that person to pay you instead up to the amount of the debt;
High Court Sheriff – the Sheriff attends the places of residence and business of the debtor and takes walking possession of goods up to the value of the debt, giving the debtor a specified period of time to either pay up or prove the goods belong to someone else, otherwise they are sold at auction up to the value of the debt;
Charging Order – where you get a charge made over the debtor’s house or other premises to secure the debt. When it is sold, you then get the amount back thus discharging the charge.
If you wish to issue a statutory demand instead of a claim, the debtor will then have 21 days to either pay or apply to Court to prevent bankruptcy/winding up action being taken. In our experience, the statutory demand is the single most effective means of debt recovery in cases where there is no fundamental dispute over whether the debt is owed.
Information is the key!
For any enforcement to be effective, information is the key. To minimise debt problems, the more information you can get at the outset the better able you are to effectively enforce. However, if you have no information on the debtor’s assets or financial position, you can get the Court to obtain this information via an Oral Examination after you have a judgment.
Routine Credit Checks.
It is also worth considering routinely credit checking people to minimise bad debt and, if you are asked to offer credit to a limited company whose credit you are unsure of, insist on a director’s guarantee so that then even if the company goes bust you can still pursue the director personally for the debt. Some organisations that may be of assistance include: Consumer Direct, Experian and Credit Check In addition, it is worth having a credit control procedure whereby consistent action is taken on debts so that you are not seen as a ‘soft touch’ by debtors.
What can we do for you?
Our philosophy is that knowledge is power and each of the steps above are not complicated, but need to be done correctly. We can assist you in setting up procedures so that you can manage your own credit control and debt recovery without the need for lawyers each time. Alternatively, we are more than happy to fully manage your debt recovery requirements on a case by case basis.
Please contact us for further information.