Collecting Your Debts
- July 1, 2015
- Comments Off on Collecting Your Debts
You provide a service or product and you expect to receive payment; a simple enough proposition but one that some may choose to ignore leaving you with that business killer; Cash Flow Crisis.
You still have bills to pay, wine to buy and the rent to find , so why should you fund someone else’s lifestyle?
So, how can bad debts be collected?
There are two main collection options; you can get assistance from debt collection agencies or solicitors. Although, it is worth noting, that many agencies will engage solicitors when it comes to issuing court proceedings for recovery…
The next question is-What to choose and what is the best option for you?
Money owed to you may not always be a straightforward debt, but could be as a result of a dispute between you and the owing party. Solicitors usually have the knowledge and expertise to know when a matter is a simple debt or likely to involve something more.
A non-qualified person is able to send out a letter to obtain the debt, but for it to be compliant with the SRA it must be overseen by a qualified, regulated person. This level of service is not always available from a debt collection agency.
So what will a solicitor do to recover money for you?
In the first instance Solicitors will look to send ‘a letter before action,” in accordance with the relevant pre-action protocol (solicitor talk for the proper letter with the proper legal stance and direction). This is essentially a letter which threatens court proceedings in the event that the debt is not paid within a stated period of time, usually 14 days.
Once received, the recipient has three options.
- Accept the debt and pay,
- Ignore it, proceedings will normally be issued, leading to a judgment being entered,
- Dispute the debt and defend any court proceedings when issued
The first option is the one most people want. The second isn’t always straight forward due to involvement of the courts. If the third option arises you may well need a solicitor in your corner.
The big question- What about cost?
Who you chose to help you with your debt collection may depend on how much you wish to pay. Some debt collection agencies charge £2.50 a letter and that is all. Here in lies the old saying, ‘you get what you pay for’. It is often just a letter,that is it. No support from the agencies and potentially no easy way of being able to speak to an actual person.
In contrast, the majority of legal firms may charge between 5-15% of the recovered debt for costs. Most firms will ask you to sign what is called a DBA (Damages Based Agreement) which will set out the terms of work they are going to do for you and what they will not do.
A Cohen Cramer DBA set at 5% covers the following:
- Pre-action correspondence
- The drafting of and the issue and service of the Country Court Claim form.
- Liaising with the court, client, and defendant up to and including the receipt of any judgement or defence.
- Where judgement is obtained, writing further pre-enforcement letter of demand.
Also bear in mind that if no recovery is made then you are not charged for the work that has been done.
My question to you-If you have outstanding debts that you want to recover; would you rather pay little and get minimal work and not much support, or have the opportunity to have more support and work done, for slightly more?
I am interested in your views and how you would go about recovering unpaid debts. I would be grateful if you would spend a few minutes completing our survey – this is not a cheap way of obtaining your details to sell you stuff, but rather an attempt to understand the market:
Thanks for your help.
Sophie Lomax – Cohen Cramer