Businesses need to be paid – even during a pandemic

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No matter how big or small your business is, managing cash flow can be challenging. That is even more so during a period of uncertainty like the one we are in now. One difficulty for many firms is dealing with debt collection. Maximising debt collection should be a priority for your business to secure your financial future, but it may be tough to navigate during the pandemic. At present, many of your debtors may be struggling financially, or claim they are unable to pay invoices.

One of the challenges for debt recovery lawyers is ascertaining the true financial circumstances of our clients’ debtors and obtaining maximum recovery of debt. Many debtors may try to get out of their obligations, claiming that coronavirus has severely impacted their business – even when this is not true. In this article by John Wiblin, we look at debt collection during the coronavirus pandemic, to help you understand what options are available to you.

Keep the lines of communication open

It is more important than ever to keep in regular contact with debtors. In challenging times, it can be easy for people’s minds to be focussed on other matters. You should ensure that you keep lines of communication open to fully understand the financial situation of those you are working with and to avoid costly disputes further down the line. In the first instance, try to come to an informal agreement with debtors who may have fallen behind.

Do not delay

Most debtors are willing to work to resolve debts and invoice disputes to avoid further action. However, if a debtor refuses to pay, you will need to escalate the issue. For simple matters we offer a fixed fee system – we will take your contract and invoice and issue the necessary documents. In more complex cases, you may want to discuss your matter with us first in a consultation. It is not always necessary to come to our offices, as consultations can be carried out by telephone or video call.

When you have concerns about the debtors ability to pay what is owed to you, commencing legal proceedings at an early stage moves you closer to getting a court judgment and potentially turning that judgment into a charge against the debtors property. If your debtor becomes insolvent, you will have a better chance of recovering your debt if you hold a charge.

Letters before action

In simple matters on our fixed fee system, we will send a letter before action (LBA) to your debtor for a modest fee of £20+VAT.

Do not be dissuaded from contacting us at this time. Often a formal letter before action is enough to encourage a debtor to discuss their financial situation with you and to come to a suitable arrangement.

A letter before action sets out:

  • Details of the debt
  • The consequences of not responding to the letter before action
  • Relevant deadlines for making payment or responding to the letter before action

County Court claims

If your debtor fails to make payment or respond to the LBA, you can then take steps to begin court proceedings. Debt recovery proceedings are typically issued through the County Court Bulk Centre (CCBC) or the County Court Money Claims Centre (CCMCC), both are currently open and in operation. For simple matters on our fixed fee system, we charge between £50 and £100 +VAT to prepare and issue a claim of this kind. There is a court fee to pay as well.

Enforcing a County Court judgment

In response to COVID-19, the Government made an amendment to the Taking Control of Goods Regulations (2013). At present, enforcement officers may not attend residential properties under writs of control. However, enforcement agents are working to contact debtors over the phone, by email and by text message.

Here to Help

If you need advice about debt recovery or wish to discuss any issues, please get in touch with John Wiblin, Partner and Head of Dispute Resolution.

Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.