Debt Collection Process
Understand every stage of debt recovery, from initial contact to enforcement
There are three main stages to the debt recovery process.
Stage one typically consists of a letter before action which informs the debtor of the value of the debt outstanding and gives the debtor a deadline by which they need to pay by or reply to the demand.
If there is no reply and the debt has not been paid or an agreement for repayment reached, then the second stage is to start legal proceedings through the County Court and obtain Judgment.
If a Judgment debt remains unpaid after the time stipulated by the court then the final stage three involves making an application for Enforcement.
Below we explain in more detail what each of these stages entails and how our debt recovery team at Rothera Bray can help.
Stage 1: Pre-legal collections
Letter before action
The first stages of our debt recovery process proceeds like this:
- Carry out a full credit check on your debtor
- Carry out an insolvency and judgments search if your debtor is an individual
- Calculate any interest payable pursuant to your terms and conditions or apply late payment interest and penalties on each invoice pursuant to the Late Payment of Commercial Debts (Interest) Act 1998 for business debts
- Send a letter before action promptly upon receiving your instructions
- Acknowledge your instructions by email to confirm that the letter before action has been sent out, by what method and with details of the amount demanded including interest and costs if and where appropriate
- When the deadline in the letter expires we will contact you to check whether payment has been received, and if not we will advise you about your further options and the next course of action
Stage 2: Court claims
If payment is not made in full after our pre-issue demand, we will seek your instructions to start legal proceedings at the County Court. The claim will usually follow this process:
Issuing claim
- Before issuing proceedings, we will carry out a further credit check/insolvency search on your debtor as appropriate
- We will add any applicable fixed costs, court fees and interest (statutory or contractual) to the debt and these will be payable by the debtor if a successful order and recovery is made
- On receipt of the Claim Form the debtor has 14 days to state whether they will:
- Pay the claim in full;
- Admit the claim and make an offer to pay in full by a certain date or by instalments;
- Part admit the claim/part defend the claim; or
- Defend the claim in full.
Issue of Proceedings/Obtaining Judgement
- If the debtor responds, we’ll contact you and advise you accordingly
- If the debtor fails to respond to the Court and fails to pay within the 14 day time limit, we will automatically ask for a judgment in Default to be entered against the debtor
- Ultimately, if a judgement debt remains outstanding and/or the debtor fails to comply with an order for instalments payments set by the Court you can proceed to the final stage of recovery which is enforcement
- County Court judgements made against debtors are recorded on the Register of County Court Judgments for six years, unless the full amount of the judgment debt is paid within one month, in which case the debtor can apply to cancel the entry. If the full amount is paid after one month the debtor can apply for a certificate of satisfaction but the entry will remain on the register marked as “satisfied”.
Stage 3: Enforcement
There are several methods of debt recovery at the enforcement stage.
Writs/warrants of control/ execution
Any recovery made depends on the debtor’s ability to pay and whether there are any assets that may be seized, or repayment agreements entered into.
Enforcement Agents
High Court Enforcement Officer (for debts over £600)/County Court Bailiff (for debts up to £5000)
Enforcement Agents have the power to seize and sell the debtor’s goods to cover the amount of the debt, however they only have right of peaceful entry. They will try to contact the debtor to allow them an opportunity to pay the debt, often by instalments.
Timescales: This typically takes from 3-12 weeks.
Charging order
This process enables a judgement creditor to secure payment of the judgement debt upon any equity in a debtor’s property. If a Charging Order is granted, the judgement creditor can register a charge or a restriction over the debtor’s property with the Land Registry so that when the debtor eventually sells the property or there is a change in title, the judgement creditor should get paid provided there is sufficient equity.
Timescales: Once the application has been made to court an interim charging order can sometimes be obtained within 2-4 weeks, and a final charging order within a further 4-8 weeks (if not contested). However the timescale can vary depending on whether an objection is filed by the debtor or if the court lists the case for a hearing.
Attachment of Earnings
If the judgement debtor is employed, an Attachment of Earnings order can be made against wages, salaries, and fees (but not against self-employed income). This order requires an employer to make regular deductions from the judgement debtor’s earnings and make payments into court in order to satisfy the judgement debt.
Timescales: It can typically take from 6 weeks to 4 months from the application being issued by the court to obtain an Attachment of Earnings Order, depending on the response of the debtor and employer.
Third Party Debt Order
If you know that the debtor has money held by a third party, you can make an application to the court to prevent the debtor’s access to that money and have it paid direct to you. The most common application of this method is against the bank account of the judgement debtor. A Third Party Debt Order requires the third party to pay the cash owed to the judgement debtor direct to the judgement creditor in order to satisfy the judgement debt.
Timescales: A third party debt order can sometimes be obtained within about 8-12 weeks of the application being issued by the court, but this can vary depending on the court and on the response of the third parties and the debtor.
Statutory Demands
Instead of a letter before action and as an alternative debt collection procedure, a Statutory Demand can be served on the debtor under the Insolvency Act. This is a formal demand which precedes the presentation of a Winding Up Petition against a company or a Bankruptcy Petition against an individual.
To proceed down this route the debt must be over £5000 and you must not know of any dispute in relation to your claim, or a debtor can apply to the County Court to set the Statutory Demand aside.
Here is how this process works
- A Statutory Demand must be personally served on the debtor. We will arrange this on your behalf by instructing a process server.
- If the debtor does not pay the debt or contest the demand within 21 days of receipt, you can start formal insolvency proceedings.
Due to the formal appearance of a Statutory Demand and the possible consequences of non-payment, this is a much more aggressive and effective method of recovering payment.
A typical statutory demand will require:
- 1-2 hours preparation
- Instructing a process server
Debt Collection Process FAQs
Why use solicitors for debt collection?
Being owed money can be frustrating. It can also be a highly emotive area if the debt is long-term.
Because of these factors, it can be very easy to be tempted to take matters into your own hands.
However, there are laws and regulations in the UK surrounding debt collection. If you end up collecting a debt in an unlawful way, this could put you at fault and potentially liable.
Seeking formal legal advice and legal action from a debt recovery solicitors ensure the correct practices and steps are followed.
So, using a solicitor such a Rothera Bray can be more cost-effective and less time consuming than attempting collection yourself.
Why use Rothera Bray Solicitors for debt recovery?
- From start-ups to large organisations as well as private individuals, we can act for you
- We have successfully recovered debt for clients throughout the UK
- All work is completed efficiently, thoroughly and appropriately to your business needs.
- Assistance with volume/bulk debt recovery possible.
- Legal advice and representation for landlords and letting agents for both commercial and residential rent recovery and possession proceedings.
- The debt recovery department is supported by our commercial litigation team. This team specialises in handling disputed or complex claims.
We recover your money whilst also ensuring our own fees are transparent throughout
