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Recovering money you’re owed can feel overwhelming, but with the right approach, it’s often possible to resolve the issue quickly and effectively. Our guide breaks it down into 8 simple steps to help individuals and businesses tackle debt recovery, step by step.

1. Collate the evidence

Before taking any action, make sure you have clear proof of the debt.

Ideally, the circumstances giving rise to the debt will be clearly shown in documents or written communications. Gather together copies of any terms and conditions, invoices, agreements, or other communications that prove the debt is owed. If you have received payments towards the debt, prepare a clear breakdown showing the remaining balance. If your agreement includes a right to charge interest, calculate this accordingly, or you may be able to claim statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998.

2. Identify the correct debtor

Ensure you are pursuing the correct individual or company. Check who signed the agreement – it’s often clear if an individual signed your terms and conditions on their own behalf.

However, it may require further investigation if you dealt with an agent acting for someone else or, in the case of a company, if there is a question as to whether a director with authority on behalf of the company entered into the agreement.

3. Assess whether it’s worth pursuing

Before spending time and money pursuing a debt, consider whether the debtor can afford to pay.

It may be worth writing to the debtor, pursuing court action, or serving a winding-up petition (if the debtor is a company) and to secure a County Court judgment. However, at some point, abandoning the claim might be the commercially sensible decision. If you’ve started court proceedings, be aware you could be liable for the other side’s costs unless agreed otherwise.

4. Warn the debtor of your intention to pursue the debt

Before rushing to court, it’s important to outline your claim in writing and give the debtor a chance to respond and resolve the issue. Failing to do so could result in penalties during court proceedings, particularly when it comes to deciding costs.

If you’re a business or sole trader dealing with an individual debtor, you must follow the specific Pre-Action Protocol for Debt Claims, which you can find here. For other cases, you should still send a clear written explanation of the debt and payment expectations, following the general Pre-Action Protocol, available here. Always aim to resolve the matter before starting court proceedings.

5. Is the debt a specified sum which is undisputed?

If a company owes you more than £750 or an individual owes you more than £5,000, and there’s no dispute about the debt, you can issue a statutory demand. This formal payment request must be delivered to the company’s registered office or the individual’s last known address, You could use a process server for this.

If the debt isn’t paid within 21 days and no agreement is reached, you can apply to the court for a winding up / bankruptcy order to liquidate the company or bankrupt the individual. This is a technical procedure, so consulting a solicitor is advisable.

6. Explore Alternative Dispute Resolution (ADR)

Disputes can often be resolved through Alternative Dispute Resolution (ADR), like negotiation. Settling early can save the time, stress and cost of court or insolvency proceedings.

You don’t need a solicitor to try ADR, but remember to label any offers as “without prejudice save as to costs.”

 Start court proceedings

If you can’t reach a payment agreement with your debtor, you may need to start court proceedings. A fee will apply, based on the debt value.

• For debts under £10,000, your claim will likely go through the Small Claims track of the County Court. This is a straightforward process you can manage yourself using the Money Claims Online portal: Money Claims Online Guide.
• For debts over £10,000, your claim will usually be handled by the County Court, which involves more complex rules. There are numerous rules and regulations which will apply to County Court proceedings and we will be pleased to help and advise you.

8. Enforce the judgment

If you bring a claim and are successful, the court will make a money judgment in your favour. However, if the debtor doesn’t pay within the set time, the court will not do anything without you making an application to enforce the judgment. Options include:

1. Applying for a bailiff to seize and sell goods to cover the debt;
2. Securing the debt by a charging order over property owned by the debtor (and later forcing the sale to release your money);
3. Obtaining a third-party debt order to recover the sum owed to you from the debtor’s bank account or other assets.
4. Applying for an attachment of earnings order which will provide for a proportion of the debtor’s earnings to be paid directly to you by their employer;
5. Applying for a company to be wound-up or an individual to be made bankrupt (as above).

Each option has specific requirements and consequences, so it’s a good idea to consult an expert before proceeding.

If you believe that you are owed money, we will be pleased to investigate your position and assist you to take action against the debtor. Contact one of our Debt Recovery experts today for further advice.