If someone owes you money then you may need to consider making a claim for the debt via the County Court (more commonly known as the Small Claims Court).
Before Taking Action
It is advisable to give the debtor a chance to settle the debt before you incur the costs of taking legal action.
Quite often a strongly worded letter threatening legal action may produce a settlement from the debtor. Settlement may be in the form of full payment or alternatively be in the case of a payment plan or reduced offer of payment.
It is of course very important for credibility purposes to start chasing the debt as soon as it becomes overdue. You can do this by sending a Letter Before Action (LBA).
The LBA should set out the circumstances surrounding the debt; i.e. how the debt came about; the amount owed and what action you are looking to take if the debt is unpaid. It may also be ideal at this stage to provide documentary evidence to prove how the debt came about and the amount owed. This should therefore remove any doubt.
Consider the Costs of Taking Action
Chasing and taking action against bad debt can be very time-consuming, tiring and sometimes very costly especially if you do not have the right tools and knowledge available.
It may be ideal first to risk assess whether it is worth your time and money to chase the debt. You may wish to consider whether the debtor has the ability to pay and whether any legal action will result in increased costs for very little or no gain. If the debt is a commercial debt, the Late Payment of Commercial Debts (Interest) Act 1998 may apply which means that you may be able to add on statutory interest to the debt, as well as claim late payment compensation, and your costs.
Even if you do take legal action and you ‘win’ your claim there is no guarantee of payment and therefore in these circumstances, you will have incurred legal costs and Court fees chasing debt for no return.
For further information, you may want to watch our YouTube Presentation below.