Debt Repayment Agreements
The documents in this folder have been drafted to help businesses who are owed money by their customers. If you are in this position, the ideal place to start is the Guidance Notes: Debt Recovery and Taking Legal Action. These Guidance Notes run through possible courses of action when debts are outstanding. The Guidance Notes include reference to debt respite legislation which provides some protection from debt collection for certain individual debtors, and you will need to consider whether and how it applies before you take any steps aimed at obtaining payment.
This folder focuses on the recovery of debt when a customer accepts that the debt is due and wishes to make arrangements for it to be repaid. The repayment agreements below can be used to agree instalment payments, give an extension of time for the debt to be repaid and arrange for a third party to step into the customer’s shoes and repay the debt.
All these documents are professionally drafted, are in Microsoft Word format and can be edited as required.
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Frequently Asked Questions
My customer admits they owe the money but cannot pay it all now. What can I do? +
Agree a repayment arrangement. The agreements in this sub-folder let you set up instalment payments, give the customer more time to pay or arrange for a third party to take over and repay the debt. A written arrangement records what has been agreed and keeps the customer committed, while avoiding the cost and delay of legal action where the debtor is willing to pay.
What should a debt repayment or instalment agreement include? +
It should record the total amount owed, the instalment amounts and dates or the extended time to pay, any interest and what happens if the customer defaults, for example that the whole balance becomes due. It should also include the customer's clear acknowledgment of the debt. Setting these out protects your position and leaves no doubt about the arrangement.
Does agreeing repayment affect my right to interest or to sue if they default? +
It depends on what the agreement says, so it should preserve your rights on default rather than give them up. A useful side effect is that a written, signed acknowledgment of the debt, or a part payment, restarts the six year limitation period for recovering a simple contract debt, giving you longer to enforce if the arrangement fails. A well drafted repayment agreement can therefore strengthen, not weaken, your position.
What if a third party offers to pay the debt for my customer? +
That can be arranged. These repayment agreements include a version allowing a third party to step into the customer's shoes and repay the debt. It records the third party's commitment to pay and the terms, so you know who is now responsible and on what basis. This can be useful where a director, parent company or associate is willing to settle the debt.
