Debt Collection


Important Disclaimer: These notes are a general statement of the law – there may be errors or omissions. I do not accept responsibility for any loss resulting from reliance on them – please see my <full disclaimer> [link to disclaimer]

Due the recent introduction of the Woolf reforms, which radically changed the civil court procedure, civil litigation is something that can only be successfully undertaken by solicitors who specialise in that work virtually full time.

Unless your claim is for more than £5,000 your legal costs are rarely recoverable from the debtor, making it uneconomic to use a solicitor anyway.

As a result, and because I prefer non-contentious work, I only provide a limited Debt collection service. However, you can save time and money by carrying out a lot of the work yourself by following the advice below.

If at any time you need help, I will be pleased to suggest a lawyer that specialises in this field.

What should I do if I am owed money and the debtor CAN'T pay?

Before issuing any court proceedings, you should try to establish whether or not the debtor can pay. You can do this by means of company or credit searches. If the debtor has no money and you take further action, you will be wasting time and more of your money pursuing them. Although it is a bitter pill, you will be much better off to write-off the debt and concentrate on productive work.

Before suing, consider how you are going to enforce any judgement. See I’ve won my case, what do I do now?

What should I do if I am owed money and the debtor WON'T pay?

If the debtor can pay but won’t, you should write to them, asking if there is any reason why they are not paying. There are two reasons for this step. If the debtor has a complaint, you can resolve it; if the debtor is merely playing for time and does not respond properly, it will be hard for them to claim later, once legal proceedings have started, that there was a valid reason for not paying you.

What should I do if the debtor has a complaint or reason for non-payment?

If the debtor has a complaint that you agree with, you should acknowledge this and offer to resolve it if they confirm that, on resolution, they will settle the debt.

If the complaint is unjustified, you should write briefly back, pointing out why the complaint is unjustified and asking for payment. Try to stick to the point in your letter – do not get upset. If matters are not resolved first, this letter will be read in court and a brief and polite letter will reflect better on you.

When should I sue?

If there is no fair complaint or no response to your last letter after about two weeks, you should write a further letter in stronger terms threatening legal action if payment is not made within seven days. You must make this letter unambiguous or the debtor may claim that you did not give them fair notice of legal proceedings and may try to claim that they shouldn’t pay your legal costs. Again, try to stick to the point in your letter be brief and do not get upset.

Is there an alternative to suing?

Instead of issuing a court summons (suing), if the debt is for at least £750, you can serve a Statutory Demand giving the debtor 21 days to pay after which you can apply to have them made insolvent.

You have to follow a statutory prescribed form. It will be worth paying a solicitor to do this simple task. The Demand needs to be served personally – unless you are able to do this yourself, you will need to pay an enquiry agent to do it for you.

If the statutory demand doesn’t work, you can then either resort to suing or issue insolvency proceedings, which are very expensive.

If there is any chance that the debt can be disputed (even on spurious grounds), a Statutory Demand is probably a waste of time: unless the dispute is clearly a sham, the court will automatically set the Demand aside at a special hearing and you will have to pay the costs.

Which court should I use if I have to sue?

For your convenience, you should issue your claim in the county court closest to you, it will be listed in your local telephone directory.

If the debtor files a defence, the case will probably be transferred to the debtor’s local county court. If this is far away, it may make it uneconomic to continue with the case, so think of this aspect before issuing. Conversely, this transfer can work to your advantage – if the debtor’s local court has had frequent experience of the debtor, they will know that they are a ‘professional debtor’ and allow less opportunity for playing the system.

You can object to the case being transferred, but you will need a very strong argument.

How will the court manage the case?

The court will be dictate the procedural steps to suit the particular case. It is important that you carefully read any correspondence from the court and deal with it promptly as any failure to meet a deadline could result in your claim being struck out.

You can find out much more about court procedures by going to www.courtservice.gov.uk and you can issue a claim online at <Money Claim Online>

What will it cost to sue?

The court will charge a fee of about £200 to issue the claim – this is recoverable if you are successful.

If you use a lawyer you will incur their fees, which will depend on how much work is involved – these are not normally recoverable in claims below £5,000, making it normally uneconomic to use a lawyer in so-called ‘small claims’.

You will spend a lot of your own time preparing and fighting the case although this may not cost you in cash but it will distract you from productive work.

Enforcing any judgement will also involve paying court fees and use more of your time.

I've won my case, what do I do now?

Getting a judgement is merely a piece of paper – you still have to collect your money. Some debtors may pay without problem but many may not in these cases, there are various ways of enforcing a judgement, such as –

  1. Charging Order This is similar to taking a mortgage over freehold or leasehold property, if the debtor owns such property or an interest in it.
  2. Execution This involves sending the bailiffs to the debtor’s address to see if there are any assets which are worth the bailiffs taking to sell to satisfy the judgement.
  3. Garnishee Order This is an order addressed to the debtor’s bank (if you can find out the identity of it and the number of the account), requiring the bank to pay the judgement debt from any funds in the account. Under this order, the bank would have to pay the lower of the value of the judgement debt or the credit balance in the account.
  4. Attachment of Earnings Order This is only applicable if the debtor is employed and being paid a regular wage. Under such an order, the debtor’s employer would have to pay the judgment debt by instalments by deducting them from the debtor’s wages or salary.
  5. Bankruptcy Although not strictly a method of enforcing a judgement, this is often an effective way of “persuading” a debtor to pay a judgement debt. However, it is only of any use if the debtor actually has assets and does not want to lose them. The danger of using this method is that it is initially fairly expensive and there is no guarantee of getting the costs back (if for instance the debtor is genuinely bankrupt). If you do not have any details of assets that the debtor might own, you can arrange a cross-examination about their financial affairs, to discover details of any assets.