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Establishing court proceedings to collect a debt

Going to court to collect a debt

Should I go to court to collect a debt?

When you have exhausted all other avenues and decided that court action is the only way you can effectively collect outstanding debts from a client, you should consider whether it’s worth the effort and cost. If you go to court, you will either have to handle the case yourself, which will divert your time and attention away from day-to-day business matters, or you will need to instruct a solicitor which can be extremely expensive. Furthermore, if you are in dispute with a client who is in a difficult financial situation, even if the court action is successful it may not actually be possible to enforce the judgement. This would leave you in a worse position than simply writing off the debt. So, in order to pursue a debt through the courts, the sum owed should be significant enough to justify the expense and you should be pretty sure that your client will be able to afford to pay up if the judgment goes in your favour.

How to issue a claim 

Before initiating legal proceedings, you should send your client a Letter Before Action (also known as a Letter Before Claim) to warn them of the impending legal action and give them one more chance to settle their debts. If this fails to have the desired effect and you decide to go ahead with the claim, you can use the HM Courts & Tribunals Service online filing service (https://www.moneyclaim.gov.uk/web/mcol/welcome) as long as the debt is less than £100,000 and the claim is against no more than two people or organisations with an address in England or Wales. Claims worth less than £10,000 can often be dealt with by the court’s small claims mediation service and rarely require an actual hearing.

If you prefer to do things by paper and post, you should send an N1 form to the County Court which initiates proceedings. However, bear in mind that this will cost more than filing online in terms of court fees. If you do not receive a response from your client, you can then send through an N225 form requesting judgment. There are a variety of other forms and template letters available which can also help with processing your claim.

Collecting payment following a successful judgment

If you win the case, you may still face an additional hurdle of enforcing the judgment. This may involve: 

● asking the court to send in bailiffs with a warrant of execution form
● having money deducted from wages using an attachment of earnings order
● freezing assets or money with a third party debt order

Debtor protection legislation

In connection with debt collection, you need to be aware that the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 will apply in certain cases to prohibit taking any step seeking payment from a debtor.

A variety of documents which may help with late payments can be downloaded from our Business Documents Folder. 

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