How does debt recovery work?

Recovery of a business debt can be effected through legal action. However, it is often preferable to try and arrange repayment terms with your debtor directly. Another alternative might be to ‘sell’ your debt to a debt collection agency. If you choose to keep the rights to recover the debt, a formal ‘letter before action’ written by a solicitor specialising in commercial litigation can often be sufficient to spur a reluctant debtor into repayment. If that fails, you may have to resort to elaborate legal action such as mediation, serving a statutory demand, and/or commencing court proceedings.

What does debt recovery mean in business?

Debt recovery is the process by which individuals or businesses try to secure the repayment of money which is owed to them. It might become necessary to undertake debt recovery proceedings for a number of reasons: the debtor may be unwilling to pay; they might be facing cash flow problems; or they might be raising a commercial or contractual dispute, arguing that they do not owe anything. Any of these situations can cause financial difficulties for your business and/or for you personally. Seeking advice from a specialist commercial litigation solicitor is often an excellent first step for resolving problematic debts.

How can a company recover a debt?

Before taking any debt recovery legal action, it is often best to make all attempts to resolve the matter through communication with the debtor. Where amicable attempts fail, a letter written by an expert commercial litigation solicitor, giving a final warning before legal action will usually produce results. Failing that, there are more-involved steps that you can take to recover your company’s debt. These include mediation, issuing a statutory demand, engaging a debt recovery agency, or starting court proceedings.

Can I sue someone for owing me money?

A lot will depend on the circumstances of the debt. It is possible to sue even friends or family to whom you have lent money if they have not repaid you. However, suing anyone is a drastic step. You will also need evidence to support your claim. This does not necessarily have to be a written agreement or contract; evidence of a conversation, or of action taken by both parties that is consistent with a loan arrangement, may be enough. Before doing anything, you should take advice from a solicitor about your debt.

Is it worth suing someone with no money?

Almost certainly not. If a debtor that you are suing has no money or any other assets which could be used to pay off the debt, there will be no way to recover your debt despite incurring additional costs in the attempt. If you are aware that an individual debtor is currently going through bankruptcy proceedings (or liquidation proceedings if the debtor is a company), you must register as a creditor to stand any chance of recovering your debt as part of those proceedings.

What happens if I sue someone and they don’t pay?

If you successfully sue someone to recover a debt, but they do not pay, you can apply to the court to enforce the judgment against them. The court may make a number of different orders to obtain payment of the debt. These include allowing bailiffs to seize and sell assets owned by the debtor, freezing the debtor’s money or assets, and securing charges over their property (e.g. their house or business premises) so that you will receive your debt from any sale proceeds when the property is sold.

How long do you have to sue someone for money owed?

For most debts, the period of time in which a debt recovery court claim must be made is 6 years. This generally begins running on the date that you gained your ‘cause of action’, for example, the date of the first missed repayment. If the debt arises from a contract, the terms of the contract may provide for a different date upon which you gained your cause of action. Limitation periods for debt claims can depend on many circumstances so it is always best to seek advice about your own situation from an expert commercial litigation solicitor.

Can you sue someone for not making car payments?

If you are acting as the guarantor on a car finance loan, it is possible for you to sue the principal debtor if they stop making payments. There are two important points to be aware of, however. Firstly, as the guarantor for the loan, you have agreed to be responsible for it if the debtor does not pay it. Therefore you will have to pay the creditor if they pursue you for the debt. Secondly, if the principal debtor stopped paying because they have no money, suing them may not succeed in recovering the debt from them.

How do I recover a debt from an individual?

If you are unable to recover a debt through agreement with your debtor, there are a number of possible ways to take matters further. You could ask a commercial litigation solicitor, to write a formal ‘letter before action’ as a final warning. More involved options include: mediation, serving a statutory demand, and commencing court proceedings. Before taking legal action, however, you should check whether the individual has been declared bankrupt. It may not be worth pursuing debt recovery proceedings if there is no way that they can pay the debt.

How do I recover a debt from a company?

If you cannot reach an agreement with the company which owes you money, there are several ways in which you can escalate the matter. Sometimes, a formal ‘letter before action’, written by a commercial litigation solicitor, is enough to encourage the debtor to take the matter more seriously. However, if this is insufficient, other options include: mediation, serving a statutory demand, and commencing court proceedings. Before incurring debt recovery costs, you should check whether the company is insolvent. Pursuing the debt further will not be worthwhile if there is no way they can pay the debt.

What is a commercial dispute?

Commercial disputes cover a diverse range of legal disagreements arising through commercial enterprise. Usually, however, commercial disputes centre on the contractual terms which govern two parties’ business relationship. This might relate matters such as the provision of goods or services; the merger, acquisition or sale of a business; or disagreements over interpretation of the contract.

What does a dispute resolution lawyer do?

There are two main aspects to a dispute resolution lawyer’s role: firstly, assessing and advising their client on the strength of their position within a dispute; and secondly, seeking to resolve the dispute through securing the best possible outcome for their client. Whilst both aspects involve judgment on the relative strengths of each party’s case, a specialist commercial dispute resolution lawyer will also consider the overall business context of the case.

Is dispute resolution the same as litigation?

Litigation can be thought of as a kind of dispute resolution; a party will make their claim against another and, if a settlement cannot be negotiated, it will go to a court hearing where a judge will decide the matter. There are other methods of dispute resolution, however. Mediation is another well-known method of dispute resolution. Instead of a judge deciding a case in one party’s favour, mediation involves an impartial mediator, who helps the parties to reach a mutually acceptable agreement.

How can I resolve a commercial dispute?

If you are facing a commercial or contractual dispute, it is important to seek advice from an expert commercial litigation solicitor. They can help you to judge the strength of your position, and advise you on the optimal way to proceed. The best commercial dispute solicitors will also assess the business context of your dispute, not just the legal situation. For example, there may be limited financial merit to disputing the matter further, or preserving business relationships may actually be worth much more to you in the long run.

What is breach of contract in business law?

A breach of contract occurs when one party to the agreement fails to meet their legal obligations. These obligations are normally set out in the contract’s terms but can also include terms which are ‘implied’. A breach of contract will give the non-breaching party a ‘cause of action’ (i.e. the grounds for making a legal claim) against the party who has breached the contract. The terms of the contract may also contain details of possible remedies for a breach – which will benefit the non-breaching party.

What are the types of breach of contract?

Breaches of contract can vary in their severity – from a minor breach where the contract terms have been contravened but the essence of the obligation was still fulfilled, to a material or fundamental breach where a party’s conduct has been significantly different from what was required. A breach can also be classified as an ‘actual’ breach or an ‘anticipatory’ breach, depending on whether one has actually occurred or whether a party has announced in advance that they will not be able to fulfil their obligations. These different types can affect the remedies available to the non-breaching party.

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