If you are owed money by an individual, and it is not repaid to you as agreed, you may reach a point when you wish to take legal action to recover it.
After attempts to recover the money have failed, there are several options open to you.
Different options are suitable for different situations, and the method you choose will depend on the size of the debt, and whether the relationship is personal or a business relationship.
Taking legal action is a last resort, but it can be effective if approached correctly. It may be the case that by starting proceedings, the money will be repaid without the need for litigation. In this article, we have a look at the three main options:
- Mediation
- Selling the debt to a debt recovery agency
- Legal enforcement of the debt
Sending The Late Payment Reminder Letter
In cases where the debtor is an individual, and not a business, there is a legal process to follow known as the Pre-Action Protocol for Debt Claims (PAPDC).
Before you start a recovery process, you should send a Letter Before Action (LBA) to the debtor. This should be formally set out, include full details and explain clearly what steps will be taken if payment is not made. The points to include are:
- The amount of the debt
- Why it is owed to you
- Your name and address
- The name and address of the debtor
- Reference to the agreement or contract that was made between you
- Details of the action you have taken so far to try and recover the debt
- The day by which payment should be made, which should give the debtor at least 14 days, but preferably 30 days, which will be seen by the courts as being a reasonable period of time
- A request for the debtor to reply in writing to the letter
- Details of what action you intend to take if the debt is not paid, which could be one of the three options below
You should also include copies of relevant documents, including an up-to-date statement of account and copies of your invoices. You must also enclose a reply form, which the debtor should complete and return within 30 days. The Letter Before Action should be sent by post.
A strongly worded letter is frequently enough to prompt payment, particularly if it comes from your solicitor. Debt Recovery Solicitors can draft this formal letter on your behalf, sending it to your debtor requesting immediate payment.
What are your Options if a Debt is Not Repaid?
If payment is not received by the deadline set out in the Letter Before Action, then there are three different steps you can take to recover your debt: mediation, selling your debt to a debt recovery agency, or legally enforcing the debt. When deciding on your course of action, it is worth considering the size of the debt and the cost of each option of recovering the debt.
1. Mediation To Recover A Debt
If you have advised the debtor that you intend to seek mediation following their dismissal of your Letter Before Action, you can contact a mediation service. Debt recovery mediation is generally faster and more cost-effective than litigation, and it can prevent your relationship with the debtor from deteriorating further. This should be done before a court claim.
If the debtor agrees to mediation, the mediator will work with you both to help you try and find an acceptable solution. This could be by arranging payment of the debt in instalments and setting dates for this to happen.
2. Selling A Debt To A Debt Recovery Agency
If you do not want to deal with recovery of the debt yourself, you can consider selling it to a debt collection agency. They will make a charge for this, so the sale price will usually be between 40 - 70% of the monies owed. Consider whether selling the debt could be an easy option if you do not want to carry on dealing with the debt yourself.
If you transfer the debt to a debt collection agency, you should issue a notice of assignment to the debtor to inform them of the change.
3. Legally Enforcing A Debt
If you wish to start legal action, you should notify the debtor of this in your Letter Before Action. It is important to follow the pre-action protocol, or you could be penalised by the court.
Taking Legal Action To Recover A Debt
The first step in the protocol is the Letter Before Action. Following this, documents should be exchanged by the parties in support of their position and negotiations can be entered into to try and resolve the matter prior to a hearing. Your solicitor will be able to deal with the disclosure of documents and negotiation on your behalf, ensuring that adequate details are provided and that your rights and interests are protected.
The court claim can generally be made online. You will need to pay the court fee at the same time. If the defendant does not reply or refuses to pay, you can ask the court for a judgement in your favour. If the defendant does not agree with your claim, you may have to attend a court hearing.
If you receive a decision in your favour, the debtor will be required to pay you in accordance with the court order. If they do not, you can then take steps to enforce the judgement.
For more information on bringing legal cases, see our Civil Court Guide.
Contact Our Civil Litigation Solicitors For Debt Recovery Services
At Cato Solicitors, we help clients recover money that is owed to them.
If you need advice in respect of an outstanding debt, call our solicitors on 0330 912 8302. Alternatively, you can email us at info@witansolicitors.co.uk or submit a contact form online. Our team have offices in both Birmingham and Northampton, and are always happy to help.
