FAQs about Debt Recovery

Debt Recovery FAQs

When is it worth trying to recover a debt?

There are many things to consider and the answer is not set in stone.  If the debt is small, say around £100, then on a cost-benefit analysis, it might not be worth pursuing the debt.  However, you should consider that not pursuing it may send a message to other debtors that you are not prepared to recover debts, making it more costly and difficult for you in the long-run.

You should also consider the circumstances of the debtor.  If he is bankrupt, then it will be practically impossible to recover the debt.  The debtor might also be having cash-flow problems, meaning you could negotiate a new payment schedule.  If you agree a new payment schedule and the debtor does not stick to his side of the bargain, the court is likely to look on your approach favourably.

How can I recover a debt?

There are three main approaches – by yourself, through a debt recovery agency or a solicitor.  There are numerous advantages and disadvantages of each approach, but if you want to legally pursue your claim through the courts, invariably you will need a solicitor.  To recover through the courts and application to the county court needs to be made.  Depending on the size and complexity of your claim, there are three ‘tracks’ in the county court.  These are:

  • Small Claims
  • Fast-Track
  • Multi-Track

Amounts up £5,000 will go through Small Claims, amounts from £5,000 to £25,000 through Fast-Track and amounts above £25,000 through Multi-Track.

What is a statutory demand?

A statutory demand is a standard legal document sent to the debtor requesting payment of the debt within 21 days.  The debtor can choose to challenge the debt by filing a claim with the county court within 18 days.  The debtor must have a genuine reason for disputing the debt otherwise the application will fail.  Typically, a statutory demand will state the details of the creditor, the amount to be paid, when payment needs to be made, the rights of the debtor to challenge the debt and the possible consequences of not paying.

When should I use a statutory demand?

They should be used as a last resort before going to court.  You need to be prepared to follow up the demand with bankruptcy proceedings if the debtor does not pay.  If you do not, then the debtor may think that you are not seriously considering court action and if the claim does go to court, the judge may look unfavourably on the use of a statutory demand as a threat.  You should also bear in mind that bankruptcy will only ensue where the debt is larger than £750.