What Is the Debt Recovery Process?

As a business, it is essential to receive prompt payment for all goods, services and work carried out. Unpaid debt can affect cash flow and could potentially have long-lasting repercussions.

But how do you begin the debt recovery process and what are the stages?

The debt recovery process can vary depending on the situation, but generally, the stages are as follows:

  1. Send a letter of claim to your debtor (pre-action letter)
  2. Issue court proceedings
  3. Obtain a county court judgement (CCJ)

The first stage of recovering any outstanding debts owed to you is to send a letter of claim (also known as a pre-action letter) to your debtor. This is a requirement of the Court’s Practice Direction and there may be costs consequences if one is not sent. We will send this on your behalf, and it will inform the debtor of the amount they owe, when to make payment by and the consequences of non-payment. The time limit for response must be reasonable and a minimum of 28 days is standard.

If there is no response to the letter, the next stage is to issue court proceedings. Once you have provided us with instructions to proceed, we will draft a Claim Form on your behalf. The court will then issue the claim and serve the defendant. They will have 14 days to file an Acknowledgement of Service or Defence and then 28 days to file a defence.

If the defendant files a defence with the court, the matter will be handled by our highly regarded disputes team.

If the court proceedings are not defended, then we will obtain a default judgement on your behalf. The court fee and a contribution towards your legal fees are usually recoverable from the debtor. Once the judgement is granted, it will be registered and affect the credit record of the individual or company if payment is not received within 28 days.

If we obtain a CCJ on your behalf but the debtor still does not pay, we can advise on the options you have for enforcement. These include:

  • Attachment of earnings. This is where the money will be deducted directly from the debtor’s wages.
  • Charging order against a property, securing the sum against a property
  • Instructing the High Court Enforcement Officer. This is usually a highly effective way of enforcing the Judgement debt as most debtors pay to avoid having their possessions removed and sold.

As an alternative to obtaining a County Court Judgement, it is possible to serve a Statutory Demand. This comes before bankruptcy for an individual or winding up for a company and is a very powerful threat that often results in payment. However, it can only be issued if the debt is undisputed. We offer a fixed fee for the preparation of a Statutory Demand.

If you would like to discuss any points in this article further or are looking for legal advice relating to recovering unpaid debts, please contact Spire Solicitors LLP on 01603 677077.