Winding up petitions are all-too-often overlooked by businesses as an effective way to chase up and secure overdue payments from debtors.
We have found that draft winding up petitions have an impressive 81% success rate in commercial debt recovery, usually due to the simple fact that it shows you are serious about recovering the money owed to you.
Only to be used for undisputed debts, draft winding up petitions help you to shout louder than other creditors who are likely to be chasing overdue payments at the same time you are. What makes a petition of this type different from other debt collection tools is that it is used when a company is unable to pay its debts on demand – deeming it technically insolvent.
Although other tools such as letters before action are also popular and helpful in many situations, winding up petitions usually get the best results when a company is genuinely struggling to pay its debts, as opposed to delaying unnecessarily.
Winding up petitions, also known as compulsory liquidation orders, are drafted by a solicitor and accompanied by a letter to the debtor requesting payment within a certain time period – usually 7 days. A warning is also included, stating that if payment is not forthcoming, the petition will be presented to Court. This almost always has the desired effect, as the debtor will of course want to avoid the cost, stress and inconvenience of going to Court.
In order to present the petition to Court, the debt must be worth more than £750 and you must be able to show that the company is unable to pay its debts. There are many different debt collection tools and techniques, and a debt recovery solicitor can advise on which would be most likely to succeed, and most cost-effective, in your specific circumstances.
Draft winding up orders or petitions are sent to the debtor with a warning letter of Court action if payment is not made within seven days
Winding up petitions are only suitable for companies which are technically insolvent, i.e. unable to pay their debts on demand.
Winding up petitions are only for undisputed debts – if the debt is disputed, this can result in an injunction against you and you having to pay costs to the other side.
Debts must be worth more than £750.
Lovetts has seen an 81% success rate in collection following a draft winding up petition being provided to the debtor.
More information on Winding up Petitions can be found on Gov.uk here, and details on how Lovetts can help are available here.
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