What Legal Action Can You Take To Recover A Bad Company Debt?
If you've chased and chased a customer and there's still no sign of a payment, it's time to consider the possible legal action you can take. In a recent article we discussed the processes you should put in place to prevent a late payment from becoming a non-payment. But sometimes you'll have to escalate the situation further to 'encourage' a customer to pay.
There are no excuses for failing to make a payment. But there are cases when a customer becomes insolvent and simply doesn't have the money to pay. In that case you should follow the points listed here when considering what action to take, including various legal steps you can take to recover what is rightfully yours.
How to recoup a company debt
Once you have exhausted all the usual methods of trying to recoup a company debt, such as payment reminders, phone calls and third party collection agencies, it's time to take your efforts up a notch.
At this stage you should send a letter to the non-paying customer to inform them of the legal action you intend to take, and give them a final chance to make the payment.
Daniel Draper, a commercial disputes partner at Farley Solicitors, says: "In so many cases, a single letter from a solicitor will make a business pay up. We outline that there is going to be legal action and talk about the statutory late payment charge, which is between £70 and £100, while interest on debt can be 8 percent above the base rate. We request payment within seven days and this normally works."
If the customer still does not pay you can then take the following action:
County court proceedings In many cases, the first step is to issue county court proceedings. This will give the debtor 14 days to pay you the amount owed or to make an arrangement to pay by instalments. The debtor has the option to dispute the debt, but if they are unsuccessful or they simply ignore the claim form, a county court judgement (CCJ) will be issued against them. This makes the debt official and allows you to take further action to recover the debt.
The different forms of enforcement action include:
Controlled goods agreement A controlled goods agreement allows creditors to instruct a bailiff company to recover the debt on their behalf. If the debtor...
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