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How Do I Recover a Debt?

January 31, 2019 by Perveen Maan

In today’s difficult market conditions small business owners may find that their invoices are not getting paid. This impacts cash flow and is stressful. The more time that is spent chasing arrears means there is less time to focus on improving the business.

Here are 3 general steps to recover a debt:

  1. Contact the debtor

Often a simple phone call or email chasing up payment is all it takes for the outstanding account to be paid. This is cheaper than engaging a lawyer and allows you to preserve the business relationship.

  1. Send a letter of demand

A letter of demand is a formal letter sent to a debtor making a clear demand for payment and advising that this is the final reminder letter before taking legal action. It also usually involves attaching copies of supporting documentation such as agreements and/or invoices. This can either be sent from you or by your lawyer.

It is important that the debtor is given a reasonable period of time to pay the amount.

Before sending a letter of demand, check your contract or agreement with the debtor to ensure the letter is addressed to the correct person or company and that your demand is in accordance with your terms and conditions.

  1. Start legal proceedings

This must be done within the statute of limitations, which is usually within 6 years of the date that the debt arose. Please note that this may differ from case to case.

It important to bear in mind that the cost of proceedings can sometimes outweigh the sum being recovered. There is also the risk that costs may be awarded against you at the end of a proceeding. You must also turn your mind to whether the debtor has enough money to repay the debt as a judgment in your favour will not be worth much if that is the case. In these instances, it may be wise to “cut your losses” and negotiate with the debtor to recover part of the sum owing, or have the debtor enter into a payment plan.

Contact White & Mason for tailored legal advice regarding your debt recovery matters.

This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation

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