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Recovering overdue debts – What are the options?

If you are chasing payment of a debt for services or goods supplied in good faith, it is not only time consuming and frustrating but ultimately could have a knock-on effect to your own company cashflow.

Before taking steps towards court proceedings, it is a good idea to check you have completed the following actions:  

Letter  before  action

Have you formally written to your client?

To have maximum impact it is best to instruct a solicitor to send a formal letter on your behalf informing the debtor that legal proceedings will follow if the debt is not settled in a given timeframe.
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Ability  to  pay

You need to make sure that the debtor has the means to pay. If they are bankrupt or their company is in liquidation the debt is not likely to be recoverable and you would need to submit a proof of debt in the insolvency proceedings.
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Usually, the threat of court action is enough to get debtors to pay up but if you have completed the above steps, then it may be time to take legal action.  You should make sure that the debt is substantial enough to warrant going to court, as it may be more cost-effective to simply write off the debt.

Make a court claim

You can apply to a county court to claim money you are owed by a person or a business. You can ask a solicitor to action a claim on your behalf or do it yourself via the Government website.
There are court fees that would need to be paid when you make your claim.

Instruct bailiffs

This tends to be the most popular and cost-effective way to recover money owed to you. You can ask the court to send bailiffs to collect the debts owed to you if not settled after obtaining a court order. There will be a further court fee when you ask the court to collect the payment. Payment of the debt is requested by the bailiffs within 7 days. If the debt is not settled the bailiff will visit the home or business address of the debtor to see if anything can be sold to pay the debt.
You can apply to either a county court or the high court if you are owed between £600 and £5,000. You can instruct a bailiff through a solicitor or apply yourself on the Government website here.

Issue a statutory demand

This is an alternative to issuing court proceedings.
You can issue a statutory demand asking for payment from an individual or a company. You can action this yourself using the Government website here. If a statutory demand is not settled within 21 days you can start bankruptcy proceedings against an individual who owes you £5,000 or more or apply to wind up a company that owes you £750 or more.
A winding up petition should be taken very seriously by any company who receives one.

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