Insolvency Limits

If the amount of the claim is under £750, including any contractual interest or late payment interest and compensation you can only issue a Claim.

If the amount of the claim is over £750 you have a choice. You can issue a Claim or you can consider insolvency proceedings.

Claim

• Advantages
  • The costs are relatively low compared to most debt amounts
  • Most of the costs are recoverable from the debtor
  • You have a choice of enforcement procedures after judgment
  • Many debtors do not want a county court judgment against them and will therefore pay
  • A Claim is the only way of forcing a compulsory timetable on a debtor if he wishes to dispute your claim
  
  
• Disadvantages
  • You have to wait until you get judgment before being able to enforce e.g. by insolvency
  • It is not "the ultimate deterrent"
  
  
• More?  Click here

Insolvency Proceedings

• Advantage

  They concentrate the debtor's mind immediately because they are "the ultimate sanction" but...

• Disadvantages
  • They can only be used where there is no dispute
  • They are much more expensive
  • The debtor's ability to pay will be affected once a petition is presented and their bank learns of it
  • You do not have complete control of insolvency proceedings once a petition has been presented
  • There is a two stage procedure for bankruptcy because a statutory demand is always needed. The costs of the statutory demand are not recoverable if the debtor then pays (unless your terms allow for this)
  
  
• More?  Click here

Which should you use?

The normal procedure is to:

• issue a Claim
• enter judgment
• instruct the High Court Enforcement Officer/bailiff and
• only if those steps fail, to consider other methods of enforcement, e.g. insolvency

For higher level debts, where there is clearly no defence, insolvency proceedings may be appropriate as a first resort.

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