Debt Recovery Processes – Step-By-Step Guide

Recovering unpaid debts can be time-consuming and legally complex, particularly if a debtor is unresponsive or disputes the claim. Understanding the correct process, from pre-action steps through to enforcement, is essential to maximise your chances of recovery and avoid unnecessary delays or costs.

Below we’ve outlined the key stages in debt recovery through the courts in England and Wales. We act in these disputes nationally, in courts across the country. There are many technical potential traps and time and again we encounter situations where people and companies either don’t pursue very legitimate claims or defences for fear of process, time sinks or legal costs, or where a very winnable claim is lost because of technical or procedural slipups we would have avoided.

In these types of debt and money claim disputes if there is sufficient value in dispute, prospects of success are sufficiently high, and the opponent has assets and the means to pay or to be forced to pay if they don’t do so after the court makes an order, we’re usually happy to consider alternative funding options so that we’re only paid if we win, and/or to work on a percentage basis. As specialist litigation solicitors we love backing our own advice and only being paid if we’re right- we have worked in this way routinely, for years.

Before Issuing a Claim, Follow Pre-Action Protocol and/or Practice Direction for Pre-Action Conduct

Don’t issue a claim unless you have followed the relevant Pre-Action Protocol and/or observed the Practice Direction for Pre-Action Conduct.

Before starting court proceedings, parties are expected to comply with the relevant Pre-Action Protocol or, where none applies, the Practice Direction on Pre-Action Conduct. These set out the steps both creditor and debtor should take to exchange information, understand each other’s position, and attempt to resolve the dispute without court involvement.

Step 1: Instruct a Specialist Litigation Solicitor to Send the Debtor a Formal Letter

The first step is to contact a solicitor and have them send the debtor a formal letter requesting that the money be repaid immediately (or within a reasonable timeframe), with legal action being taken if payment is not received.

People often consider doing this themselves and of course can do so. There are benefits to that approach, but also drawbacks. Some of the potential risks in that approach are obvious- you might miss something legally, factually, or commercially such as correctly identifying the best claim, correct opponent, or proper value of the dispute. Some of the benefits in instructing solicitors are less obvious, but are very real, including the value for you in being seen to be escalating the seriousness of the non payment, and getting specialists involved. The importance of this is often undervalued but we know for example that some insurers will only settle claims after court proceedings are issued. In a similar way being seen to have instructed solicitors is incredibly powerful in moving you up the list of priorities.

You can decide on a date for a response to the letter 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. Usually this is 14 days initially for a company or 30 days for an individual.

Step 2: Response Received? Discuss Alternatives to Court

If the debtor responds to the Letter of Claim, your solicitor will review their position with you and advise on the most appropriate next steps. This may involve assessing any dispute raised, reviewing supporting documents, or considering the debtor’s financial position.

At this stage, your solicitor will typically explore alternatives to court proceedings, such as negotiating a repayment plan, agreeing a settlement, or engaging in mediation or other forms of alternative dispute resolution (ADR).

Step 3: No Response? Issue Court Proceedings

If the debtor does not respond, you can issue a 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. The pressure on a debtor to pay your legal costs (or some of them) is really powerful leverage that can be used to improve your position in negotiations.

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.

Step 4: Default Judgment

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.

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. We look at this where we’re instructed and discuss this with you.

We don’t typically act in small claims but are happy to consider doing so, especially in business to business claims.

Fast Track

Debts between £10,001 and £25,000 will also be dealt with in the County Court. At this level legal costs are recoverable in addition to the underlying debt claim value, subject to court rules and the courts discretion. When considering exercising discretion and allowing costs recovery the judge looks at the conduct of the parties, and how reasonable and proportionate you have been. That means looking in detail at the steps you have taken, and whether any time has been wasted or steps taken inappropriately. This is where factual analysis and legal knowledge can be critical in improving your prospects of recovery, including your legal costs and court fees.

Intermediate Track or Multi Track

Debts between £25,001 and £100,000 can be allocated to either the intermediate track or multi track, with the multi track reserved for the most complex of cases.

Debts exceeding £100,000 may be issued in the High Court, which can be really helpful not least as case administration is dealt with online in a portal we have access to, and where we can deal with the filing of court documents in that system rather than emails (used in the county court). These cases usually also have greater complexity and are longer running for them to remain in the High Court, otherwise even high value disputes can be transferred to the county court.

We routinely act in Fast Track, Intermediate and Multi Track disputes in County Courts and the High Court, across the country.

Insolvency and Statutory Demands

An alternative route for reclaiming undisputed debts (not contested by the debtor) of over £5000 is to consider pressing a debtor’s insolvency. This is started by drafting and serving a statutory demand.

This is a formal payment demand that usually demands that payment is made within 18 or 21 days depending on whether the debtor is a company or an individual. 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.

Threatening insolvency is a blunt instrument because if a debtor has a genuine dispute regarding the monies owed, insolvency won’t be appropriate and so time and effort can be spent in this way, that is wasted- and you need to circle back to start the court debt recovery process as above. Equally this can sometimes be an effective way to shake a debtor into prompt action- there is still considerable impact and stigma regarding insolvency and if a company is wound up it can no longer trade and no longer legally exists. Of course if a company or individual are insolvent the worry becomes whether there is value in pursuing any form of recovery- and so there is value in first assessing cost; benefit and prospects of success. In simple terms; what assets does the debtor have?

For all the above reasons you must be very careful not to use this process for disputed debts. More information is available on this; here.

Step 5: Enforcement

If the court grants judgment in your favour but the debtor still fails to pay, your solicitor should advise you on the most appropriate enforcement action to recover the debt. This isn’t the first time you should be having this conversation- it should form part of the initial conversations as above and it should be clear from the outset what you’re going to do if the debtor doesn’t pay even if the court orders them to.

Depending on the debtor’s circumstances, enforcement options may include:

• Charging Order – this is the most effective step to enforce a judgment for money, and involves ‘securing’ the judgment debt against the debtor’s property or land. This is registered at Land Registry. Ultimately, if the debtor continues to not pay, we can force sale of those assets to force repayment. This is a very effective route and is the most likely option in our work.
• Warrant or Writ of Control – instructing County Court bailiffs or High Court Enforcement Officers to seize and sell the debtor’s goods. Although this can appear effective, it is expensive, time consuming and only really works for lower level debts at small claims level.
• Attachment of Earnings Order – recovering the debt directly from the debtor’s wages
• Third Party Debt Order – freezing and recovering funds held in the debtor’s bank account
• Order to Obtain Information – requiring the debtor to attend court to disclose their financial position
• Insolvency Proceedings – issuing a statutory demand and potentially pursuing bankruptcy (for individuals) or winding-up (for companies).

Your solicitor should guide you on the most effective option based on the debtor’s assets, financial position, and the likely cost and speed of recovery. In some cases, a combination of enforcement methods may be appropriate to maximise recovery.

Helix Law Helps Creditors Retrieve Debts

Our commercial litigation team act nationally in debt recovery for debts ranging from tens and hundreds of thousands, to tens of millions. Our largest client lends billions globally. We assist with their recoveries in England and Wales. We also act for business owners unpaid after exit, bridging lenders on unpaid secured debts, and for private individuals in a variety of circumstances, including those who have loaned monies for property development but have not been repaid. There are many other examples where we get involved in the recovery of money owed. If you’re dealing with an unpaid debt, we can guide you through the process efficiently and strategically, from initial review and planning to correspondence, court proceedings, enforcement and ultimately payment. Contact our team to discuss your situation. We’d love to assist you and are happy to back our own advice.