Debt Recovery – Pitfalls to Beware

If you are owed a debt, think twice before going straight to Court. Strict rules govern the conduct of a debt recovery action (pre action conduct) before a Court is asked to provide a ruling in the dispute. 

If you are owed money: 

1. Send the Debtor a letter of claim – setting out the circumstances in which the debt arose and the amount you are claiming
2. Allow the Debtor time to acknowledge the letter (14 days is reasonable) and a reasonable period of time to provide a response (again, 14 days is reasonable)
3. Businesses beware – you need to provide the Debtor with further information- this includes:

•  Organizations who can assist them e.g. Citizens Advice or the National Debtline
•  An address to send payments to and which methods of payment you will accept
•  Contact details for the Debtor to discuss repayment options with you 

If the Debtor does not respond in a reasonable timeframe, only then should you consider issuing Court proceedings. 

Health Warning!

If you fail to comply with the pre action conduct requirements, the Court can punish you with powerful sanctions and will look at the overall effect your non compliance has had on the Debtor.

These sanctions include: 

•  Making an order in costs against you 

-even if you win your claim, you may not recover all of the costs for the work incurred in preparing the court application

-you may have to pay the other side’s costs for defending the application

•  Order you to pay a high rate of interest on the costs payable by you
•  Punish a failure to settle the matter early, again by making you pay costs

The strict pre action conduct requirements aim to encourage parties in a dispute to raise issues and attempt settlement early and that the Court should be seen as an option of last resort to determine disputes. 

For specialist advice on Debt Recovery and Business matters, call the Litigation Team at Kidwells Law on 01432 278179.

The information provided here is given for general information purposes and does not constitute legal advice. Regulated by the SRA no 00491008.