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Debt Recovery…What, When, and How?

Debt Recovery…What, When, and How?

WHAT is Debt Recovery?

Debt Recovery is the process of pursuing a debt that is owed to you. This debt may have surfaced for many reasons, such as an unpaid loan or an unpaid invoice. As well as the amount that is owed, you may also be entitled to charge interest on the debt, depending on various factors, including the amount of debt, the parties involved, the terms of the agreement, and the length of time it has been unpaid.

WHEN can you pursue the Debt?

Often, the agreement will specify the period before further action can be taken. The agreement may also state the length of time before interest can be added to the debt, and at what rate. Where the agreement is silent, what is reasonable in the circumstances is likely to dictate when further action is taken. In both circumstances, the Pre-Action Protocol for Debt Claims governs the timeline.

As per the Limitation Act 1980, you have six years to pursue a simple contract debt, such as credit cards, personal loans, and catalogues. A longer timeframe exists where the agreement between the parties is via a Deed.

HOW can you pursue the Debt?

The general steps to pursue a debt are as follows:

  1. Write a letter of claim to the debtor, outlining the background of the debt, the amount, and the consequences for a lack of payment;

  2. If no response is received, you can proceed to issue a Claim against the debtor;

  3. At this stage, one of two things will happen:

  4. The debtor will file a defence;

  5. The debtor will not respond.

  6. In the event a defence is filed, the matter will proceed through the Court, before ultimately ending up at a Trial, whereby the Judge will deliver a verdict on the matter. In the event a response is not received, however, you can then seek a judgment in default (often referred to as a CCJ, which stands for County Court Judgment).

  7. Once a CCJ is obtained, either in default or via a Trial, this is a Court Order for the debtor to pay you the sum claimed. Should the debtor still refuse or fail to pay in accordance with the terms of the CCJ, you can then consider enforcement options, such as instructing Bailiffs or a High Court Enforcement Officer.

In the event your matter reaches stage 2, one important aspect to consider is that if the claim is solely for debt which is below £10,000.00, this will ultimately be allocated to the Small Claims Court. Should this be the case, in the event you are successful in your claim, it is likely that you will only be able to recover limited fixed costs (e.g., the Court Fees), and not all your legal fees. This is something to bear in mind when considering the instruction of a solicitor.

Dependent on the circumstances of your debt recovery, we may be able to provide assistance on a fixed fee basis. Please refer to our debt recovery fees outlined on our website here

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If you would like further information on the above or have a debt that you want to pursue and require legal assistance to do so, do not hesitate to give our Dispute Resolution team a call.

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