If you're reading this you're probably wondering how you're ever going to recover debts from unwilling debtors. Recovering debts is never an easy step for many businesses to take because of how time consuming it usually is. This is why we have issued out clear and easy steps to recovering your debts. After reading this, you will know the necessary steps to take when looking to recover your commercial debts.
Step 1 : Send a Letter Before Action
Before issuing any legal proceedings a Letter Before Action (LBA) should be sent to a debtor. An LBA is a formal letter which sets out what is owed from a debtor to your business. It gives your customer a set time period (usually 7 days) in which to pay. An LBA can be sent for as little as £1.50 plus VAT and on average, 86% of cases result in payment at this stage read more.
Step 2: Start a Legal Claim
If you send a letter before action to your debtor but you don't receive a satisfactory response then the next stage in the legal process is to issue legal proceedings through the County Court. This is a formal process where the debtor will be sent a court form requiring them to pay the debt, plus interest and costs within 14 days. If the Late Payment of Commercial Debts (Interest) Act 1998 applies, compensation of £40 - £100 per invoice will also be added to the value of the claim.
Insolvency- An alternative to issuing a County Court Claim is to commence insolvency action such as winding up proceedings against a business or bankruptcy proceedings against an individual.
Stage 3 : Judgement
A County Court Judgment (CCJ)is a Court Order that confirms that the debtor has defaulted on payment. A CCJ can be obtained immediately after the expiry date of the County Court Claim. The CCJ is the final decision by the Court which gives you the power to take enforcement action in order to collect the debt. The CCJ is also recorded against the debtor’s credit record affecting their ability to obtain credit .
Stage 4: Enforcement
Once a County Court Judgment has been obtained, it is then possible to 'enforce' that debt immediately. The most common method of enforcement to instruct a Bailiff or High Court Enforcement Officer to attend the address of the debtor and collect the debt or seize goods. However, there are other enforcement methods that can be used depending on the circumstances of the individual case. At Lovetts our paralegals will always advise on the most appropriate method of enforcement based on their experience and expertise with similar cases .
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