Debt recovery need not involve the expense of going to court

Posted on February 24, 2017

If expensive fees are keeping you away from dispute resolution in the courts, consider the alternatives. Court fees have risen but there are other dispute resolution options that businesses can use to recover debts and resolve disputes.

Rising court fees

The number of number of county court judgments (CCJs) against businesses has fallen recently according to The Law Society Gazette*. It could be that businesses have been “managing their debts better since the vote to leave the EU on 23 June 2016, but the fall is being blamed in part on higher court fees making court proceedings unaffordable for some businesses.

It’s true that the cost of issuing proceedings in the courts has risen in the last few years. For example, the fee for issuing a claim at court to recover up to £1,000 is now £70, a claim for between £5,000 and £10,000 is £455 and if your claim is over £10,000, the fee is 5% of the total claim.

These issuing costs are on top of solicitors’ fees for acting on your behalf and it is understandable that businesses are loathe to spend any more money on chasing debts through the courts when they are already out of pocket.

I won’t deal here with the argument that higher court fees restrict access to the courts and justice for those who cannot afford the costs – that’s an issue for another time. What I can do is highlight alternative dispute resolution methods and debt recovery options for those whose budget cannot run to court fees.

There are more ways to resolve disputes and recover debts from stubborn or impecunious debtors than going to court. There are several very effective alternatives available and a solicitor can advise you on which option best suits your circumstances.

Your choice will depend on factors such as the nature of the dispute or debt, the status of the defendant or debtor and what you want from the commercial relationship with the other party in the future. Here are a few examples.

Talk!

It is always worth discussing the issues in dispute with the other party particularly if they are a significant client.
Don’t just bat written correspondence and emails back and forth: pick up the telephone or try and get a meeting.
If the debtor proves unwilling to engage, your solicitor can start negotiations on your behalf. Sometimes, a failure to pay a debt can be due to an oversight.
Even if the initial discussions do not result in payment, they quite often reveal additional information which can help you decide how to proceed and whether a compromise is possible.

Send a “Letter before action” to recover a debt

Your solicitor can send a letter before action to the debtor requesting payment of the debt within 14 days, failing which court proceedings will be started.
Even if this letter does not result in the required payment, more often than not, the threat of proceedings is enough to persuade a debtor to talk about the debt.
If relations are fragile, your solicitor can conduct a negotiation about the debt on your behalf.
It is common for a compromise to be reached: the debtor might, for example, agree to pay the debt in instalments.
For more information on letters before action, click here.

Is the debt disputed? Try Mediation.

The debtor might dispute the debt and put forward a defence as to why it is not due. If discussions about the debt become tense and the commercial relationship starts to break down, the parties might benefit from taking the dispute either to an informal “round the table” discussion with or without solicitors or to a more formal mediation.
Mediation is an alternative form of dispute resolution procedure. It involves the parties in dispute appointing a mediator to act as an independent neutral to help them to resolve their issues. It is a confidential process and can also help the parties to save their commercial relationship. It is also less expensive than a potentially bitter court hearing.
You can read more about mediation here.

Insolvency proceedings might be possible

You might be able to start winding up proceedings if a company is unable to pay its debts as they fall due and there is no dispute about the debt.
Bankruptcy proceedings against an individual might also be possible for debts over £5,000. For more information on insolvency, winding up orders and statutory demands, click here or contact me using the details below.

*Record low for CCJs revives court fee fears (Law Society Gazette article, 7 February 2017)

Contact

For guidance on what action you can take to avoid going to court and to resolve your dispute or recover a debt, contact Christopher Burke on 0161 684 6941 or make an enquiry.

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.