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Business Debt Recovery

Updated: February 14, 2019
Sometimes businesses will have to deal  with companies that fail to pay their invoices. These companies may ignore all attempts at debt recovery. Unpaid invoices can have a serious impact on your cash flow. Sometimes, requests for payment fail to produce results. In those scenarios, legal action becomes necessary. This is where experienced debt collection solicitors can help.The Late Payment of Commercial Debts (Interest) Act 1998 protects your business. It gives  you the right as a creditor to recover compensation, interest and cost for unpaid debts. In addition, it discourages delinquent payments. Your company has a right to collection of the money owed, interest, compensation and costs. If your customer has not paid invoices, you can take legal action.

For payment recovery, speak with our debt recovery solicitors at Helix Law. It can be a single invoice. Or, it can be a business with a history of unpaid invoices

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The Process for Collection of Debts you are Owed

When your clients have unpaid debts, a debt lawyer can intervene. At Helix Law, our solicitors follow the guidelines set out in the Pre Action Protocol for Debt Recovery and other rules and protocols required by the Civil Procedure Rules (CPR). These ensure you have met all legal requirements. These protocols and procedures set a schedule for recovery of your due payment.

First, we will liaise between your business and the indebted party. Debt solicitors will contact the debtors on your behalf. Many people will pay their invoices when they receive a solicitor’s letter. An official telephone call from solicitors can also be the pressure they need. However, sometimes, debtors may challenge these claims. Sometimes the letters and calls can go unanswered.

If these requests fail to result in collection of the amount owed, we will take further action. This can involve checking the credit of the debtor. A credit check evaluates their ability to pay. Also, we will make additional attempts at contact and recovery.

If our solicitors can reach them, we will work with the indebted party. We will help your two businesses to formulate payment plans for full recovery of the amount owed. A settlement plan is often the best course of action for all involved. It allows both parties to avoid costly legal fees and court appearances. Otherwise, we can come up with a recovery solution that suits you both.

Legal Steps Toward Debt Recovery

Requests for discussion or negotiation may fail. In such cases, debt recovery solicitors can take further measures. One solution used by some debt collectors is serving  a statutory demand. Statutory demands are serious. They are the first step toward serving a winding-up or bankruptcy petition upon the other party. It can lead to the liquidation or bankruptcy for the debtor. However, statutory demands are only appropriate where there debt is not disputed – getting this wrong can lead you into costly mistakes. If you are considering a statutory demand then read this article on statutory demands first.

A statutory demand requires a response. Usually, the window of time is within three weeks from the date served. This is the first step toward forcing a business into liquidation or an individual into bankruptcy over an unpaid debt. However, a demand ending in liquidation or bankruptcy is not ideal for your business. Bankruptcy means it is likely that the debtor will not be able to pay all or any amount of the sum owed.

Sometimes debtors enter into a CVA to avoid insolvency proceedings. A CVA sets up a monthly payment plan between the debtors and all creditors as long as 75% of the creditors agree to it. A CVA lasts until the business has cleared their debt. Ultimately, a statutory demand doesn’t have to end in insolvency or in court. However, it will necessitate action from an unresponsive debtor. Great care should be taken with statutory demands.

Debt collection solicitors can pursue other enforcement methods. One solution is to require the indebted party to appear in court by issuing a county court claim. If you have Judgment adebt lawyer can also help you apply for a Third Party Debt Order. If the debtor has assets, our solicitors can apply for a charging order to secure the Judgment against those assets – usually a property. Apply for an attachment to earnings order may be a good option for recovery of the amount owed if you know who the debtor’s employer is

Why Choose Debt Solicitors over Collection Firms?

Debt recovery can be a complex process. Our solicitors will work with you to find the right solution for your unique case. Debt recovery companies cannot offer the whole service, if their demands don’t work they will usually refer you to a solicitor for court action. if you use Helix Law  we take the debt from start to finish making recovery faster and more cost effective.

At Helix Law, our debt recovery solicitors will help you get back the money you’re owed. As debt lawyers, we can offer a wider range of options than debt recovery firms.

Often, debt recovery firms cannot handle the complex legal situations of collection. Debt collection solicitors can manage the intricate legal processes. As outlined above, the recovery process is often quite complicated. It requires clear communication between all parties. In addition, it involves tracking down debtors. Sometimes, it is necessary to file applications and petitions at court. Debtors can challenge these collection claims. This can happen even when you are in the right.

Debt recovery firms cannot always pursue all legal actions to combat these claims. However, a debt lawyer can. Our team of debt solicitors at Helix Law has years of experience. We have the legal authority to effectively navigate this process. Above all else, we keep in mind your company’s financial situation.

Call for No-Obligation Advice Today

If you or your business have unpaid debts, call Helix Law today. Our debt recovery solicitors can offer no-obligation advice. We work with you to structure fees and payments if possible. Together, we will find a solution.

Solicitors' Debt Recovery Letter - 10% of the sum recovered - minimum debt £2,000

FAQ

It is very frustrating when money owed to you is not paid within an expected or agreed upon timeframe. However, when deciding to pursue unpaid debts, you should consider:

  • If the expenses incurred by pursuing the recovery of the debt are worth the amount in dispute. With the Helix zero risk option the debt is  always worth pursuing if the debt is greater than £1,000. If you don’t get paid, we don’t get paid.
  • If you choose to write off small debts (usually under £1000), whether this could set a precedent of late or non-payment to other debtors.
  • Before writing off a debt think about how much work you would have to do to replace that bottom line profit. If your profit margin is 10% then writing off a debt means you have to do 10 more jobs of that size to replace that lost profit.
  • If you have thoroughly investigated why the debtor has not yet paid – there may be a dispute regarding the quality of the goods or services you provided; or the debtor may be in financial difficulty (in which case you may negotiate a payment plan, part-payment, extending the payment deadline, or writing off the debt)
  • Whether there are any pre-existing County Court Judgments (CCJs) against the debtor which may impede the likelihood of recovering the debt
  • Whether the debtor has secured a Debt Relief Order, which could impede your chances of recovering the money. This means that their financial situation currently absolves them from being able to settle debts.

Put simply, yes. When considering whether to pursue money owed to you, many of the factors listed above come into play depending on the debtor’s financial situation.

Things to consider:

  • Individuals or small businesses are more likely to have financial difficulties – you should consider whether they will have the means to pay the debt even if you do win in court against them. In the case of individuals you should check to see if they own their own property. If they do you are much more likely to recover payment.
  • Sole traders have personal liability for debts, so could be worth pursuing if they have significant assets. However, some company directors have been known to use the protection of limited liability in their favour to get out of paying what they owe.
  • Large organisations may attempt to use their financial advantage against you, and threaten to take away their custom, routinely drag their heels in regards to payment, or prolong court disputes to dissuade smaller companies from taking action against them. It is also worth keeping in mind that the larger the organisation, the higher the likelihood that debt problems arise from internal communication issues. Helix Law specialises in helping SMEs take on bigger organisations and getting payment. We do this with expertise and a willingness to work on a no win no fee basis.

In some cases, compromising may help you recover at least some of the money rather than none. There is little point in demanding full immediate payment if the debtor is in a position where they cannot pay.

In these situations, talk to the debtor and negotiate a plan for part-payment or rescheduling of debts, ensuring this plan is put into writing. This way, you might recover at least some of what you’re owed in the meantime. Willingness to compromise will also help to maintain a good relationship with the customer, especially if their financial issues are temporary. Be careful what you agree to and, where possible, ask a director for a personal guarantee. If the directors won’t give it then you have strong indication that the debt won’t get paid. In these circumstances acting swiftly can mean the difference between getting paid or eventually becoming an unsecured creditor in a liquidation.

A compromise or contractual agreement may allow you to claim interest on overdue payments. The original contract may stipulate credit periods and how interest may be charged when payment runs overdue.

The Late Payment of Commercial Debts (Interest) Act 1998 covers commercial debts, even when there are no agreed terms of credit. The Act allows the charging of interest at a set rate, calculated by the Bank of England base rate in addition to 8% from the end of a credit period (usually 30 days). The same act allows you to recover compensation on each unpaid invoice; £40 for debts less than £1000, £70 less than £10,000 and £100 for all other debts.  In addition, a contract can specify the right to recover costs incurred while chasing overdue debts. This is particularly useful if the debt is £10,000 or less because it will avoid the Small Claim limit for recovering legal costs. Nevertheless, costs are always at the discretion of the court. It should be noted, however, that in practice, generally very few firms enforce interest payments or recovery costs, unless the dispute is taken to court. If you do intend to enforce interest payments on overdue debts, you should make this clear in your contracts.

When you decide that the debt has been outstanding for long enough, or a contract has been breached, contacting a debt recovery solicitor is a good course of action. They can determine the likelihood that you will recover the payment through legal means and advise whether you could/should take your case further.

Reaching out to a solicitor can prompt your debtor to pay you back faster. If your solicitor issues them a formal letter specifying a timeframe for repayment before a legal case is opened, the debtor may act to avoid going to court. Helix Law send that first letter for free and only charge 10% of anything paid as a result of that letter. [cta]

However, it is advised that you first attempt to resolve the matter amicably with the customer, negotiating payment options, before contacting a solicitor if you value the debtor as a customer. Just don’t leave it too long.

Meet the Helix Law team

Contact Helix Law on 01273 761 990 or email: [email protected]