How do I begin legal proceedings for the recovery of debts?

Don’t issue a claim unless you have followed the relevant pre-action protocol http://www.justice.gov.uk/courts/procedure-rules/civil/protocol and/or observed the Practice Direction for Pre-Action Conduct  http://www.justice.gov.uk/courts/procedure-rules/civil/rules/pd_pre-action_conduct

The first step is to contact a solicitor and have them send the debtor a formal letter requesting that the money is repaid immediately (or within a reasonable timeframe) with legal action being taken if payment is not received. You can decide on a date with your solicitor as to when legal proceedings should begin in the case that you do not receive the payment, and the letter must specify this. You can choose to send the letter yourself, but it is likely to be taken more seriously if it is sent by your solicitor.

If the debtor does not respond, you can issue a county court claim. Only do this if you are advised by a solicitor that you have a strong case and sufficient evidence (e.g. contracts, receipts, copies of correspondence), or you could be saddled with expensive legal fees and no success in court due to insufficient evidence. Even if you issue the claim yourself and have no legal fees you will be expected to pay the debtor’s legal fees if you lose. Sometimes you can lose on a technicality because you do not understand the court process.  Find more information from Helix Law on Contract Law here.

If your claim goes to court, it will be assigned to a ‘track’:

• Small claims track: small-to-medium claims (up to £10,000 of disputed debt) will usually be settled in a County Court. This is generally an inexpensive and simple procedure. Beware, you can start a small claim and the debtor can bring a counterclaim greater than the limit for small claims and you will then be at risk of paying your opponent’s legal costs.
• Fast track: debts between £10,001 and £25,000 will also be settled in the County Court
• Multi track: debts exceeding £25,000 may be issued in the High Court, which can incur significant expenses, last much longer and become more formal and complex.

An alternative route for reclaiming undisputed debts (not contested by the debtor) of over £5000 is to issue a statutory demand. This is a formal payment demand that usually demands that payment is made within 21 days. If the money is not repaid within that time frame, you may petition the court to make the individual bankrupt or to ‘wind up’ the debtor company – this can sometimes be more effective than standard court proceedings. However, this route is not effective when the debt is disputed. You must be very careful not to use this process for disputed debts for reasons set out here.