Debt Recovery Process

When collecting a Commercial debt there are four main steps that we need to go through. Step 1 is to send the debtor a Letter Before Action (LBA). Approximately 75% of cases end in settlement by way of payment at this step. If the matter is not settled and payment is not received, we then move to step 2. The second step consists of issuing court proceedings. Step 3 involves obtaining a County Court Judgment (CCJ) and Step 4 is commencing enforcement action. Alternatively, in step 4, insolvency and or bankruptcy action can be taken against a debtor. We have provided more details on each of these steps below.

Debt Recovery Solicitors can support your business through all the steps of the debt collection process on a "no win no fee basis" or simple fixed fee basis. We can even offer our services at completely no legal fees!

The Four Steps of Debt Recovery

Step One: Letter Before Action

Prior to issuing any legal proceedings and in order to be Pre-Action Protocol compliant we are required to issue a Letter Before Action (LBA) to a debtor. An LBA is a formal letter on our letter head which sets out in very clear terms:

  1. What is owed from the debtor to your business
  2. How long your debtor has to pay it (usually between 7 to 14 days)
  3. It sets out and informs the debtor the consequences of non-payment

As approximately 75% of cases can be settled by way of an LBA. Debt Recovery Solicitors do offer a service where we just send out LBA's for our client's. Please contact us for more details.



Step Two: Legal Action

If upon sending a letter before action to your debtor you do not receive an acceptable reply, the next step is to take legal action by issuing court proceedings at the County Court. At this point the debtor will receive a court form from the court demanding them to pay the debt together with interest and costs within 14 days. If it is a commercial debt, the Late Payment of Commercial Debts (Interest) Act 1998 will also apply. This will result in the addition of a fixed sum compensation between £40 - £100 per invoice being added to the value of the claim.

Bankruptcy - An alternative to the above, if the debtor is an individual you can apply for bankruptcy proceedings to make the debtor bankrupt. This will affect their ability to obtain credit or become a company director amongst other things.

Insolvency - A further alternative to the above is to commence insolvency proceedings such as winding up petitions against businesses.

Step Three: Judgment

A County Court Judgment (CCJ) is a Court Order that confirms that the debtor is liable to pay your debt. As soon as the County Court Claim has expired, we can proceed to obtaining a CCJ. The CCJ is the judgment given by a judge at the County Court which enables you to take enforcement action against the debtor to recover the debt owed to you. The CCJ is also placed on record against the debtor. This affects credit worthiness and affects their ability to obtain credit amongst other things.


Step Four: Enforcement

As soon as we have obtained a County Court Judgment, we are then able to immediately 'enforce' the debt. There are a number of ways to enforce a debt such as an attachment of earnings orders or charging orders. However, the most common method is to instruct a Bailiff or High Court Enforcement Officer to visit the debtor's address and collect the debt or seize goods to the value of the debt.

We will always advise you on the best method of enforcement depending on each individual circumstance.