Commercial Debt Recovery Process
Jarmans Solicitors Debt Recovery Process
Late payments of invoices can be a nightmare for small businesses and can seriously affect your cashflow. Chasing them can also take up valuable time and effort using resources that your business needs. Jarmans’ Debt Recovery Department are happy to assist and guide you through the process of collecting unpaid bills in the most cost effective and timely manner.
If you’re owed money by another business you are entitled to add late payment interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998. There are four stages in this process, which a legal representative can guide you through.
Stage 1 – Letter Before Action
A Letter Before Action (LBA) formally requests payment of any debts to your business and acts as a warning that a court claim is imminent. It sets out a time period in which to pay. This is an essential part of the process as if an LBA isn’t sent the rest of the court case could be forfeited.
Stage 2 – Legal Claim
The LBA has been sent and there hasn’t been a satisfactory response. At this point you issue legal proceedings through a County Court. Your debtor will be sent a court form which requires them to pay their debt, plus interests and costs within 14 days. At this point you can also add interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998, if applicable.
Stage 3 – County Court Judgement (CCJ)
A CCJ can be applied for as soon as a legal claim has expired and is a Court Order which confirms that you are owed money by the debtor. It provides you with the power to enforce collection of the debt and is recorded against the debtor’s credit record.
Stage 4 – Enforcement
There are a number of enforcement methods and each case varies as to the best course of action. With a CCJ you can then immediately enforce the debt. Most commonly this is done by instructing a Bailiff or High Court Enforcement Officer to collect the debt or seize goods.
Is there a cut off for claims?
The Limitation Act allows 6 years to bring a contractual claim and 12 years for claims that are pursued relevant to a Deed.
Late Payment – Interest
The Late Payment of Commercial Debts (Interest) Act 1998 allows suppliers to claim for invoices up to 6 years after they were originally issued. While it is mostly used for unpaid debts, you can also make a claim for late payments (even after they have been paid). For suppliers who are ending a business relationship with a late paying customer, it’s possible to claim a significant amount in compensation. Aside from interest on the late payments which runs at 8% above the Bank of England base rate, each invoice that was settled late can incur a minimum compensation amount of £40. If you are concerned that a customer hasn’t paid an invoice or are considering placing an historical claim, please contact our Debt Recovery Department for experienced legal advice.
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