EFFECTIVE DEBT RECOVERY

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EFFECTIVE DEBT RECOVERY
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EFFECTIVE DEBT RECOVERY

• We will be dealing with
• Preventing bad debts
• Chasing bad debts
• Enforcing judgements

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PREVENTING BAD DEBTS

• THE KEYS TO EFFECTIVE DEBT COLLECTING
• ASSESSMENT OF CLIENT
• MONEY UP FRONT
• WELL DRAFTED TERMS AND CONDITIONS
• IN-HOUSE PROCEDURES AND SYSTEMS

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PREVENTING BAD DEBTS

• ASSESSMENT OF CLIENT
• Ask each new client to complete a credit
  application.
• Ask for references from their bank or customers
• Online reports credit check.

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PREVENTING BAD DEBTS

• TERMS CONDITIONS
• Price include part payment in advance.
• Discount if payment made earlier.
• Payment terms.
• Right to charge interest.
• Time limit to raise a complaint.
• Retention of title.

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PREVENTING BAD DEBTS

• IN-HOUSE PROCEDURES
• Record invoices that are sent out.
• Follow-up reminders
• Automated chasing letters
• Telephone chasing

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CHASING BAD DEBTS

• STEP 1 PRE ISSUE CONSIDERATIONS
• Who is the debtor?
• Sole trader
• Individual
• Partnership
• Limited liability partnership (LLP)
• Companies (Ltd)
• Unincorporated Associations / Clubs
• Crown, Government and Local Government
• Societies
• Foreign States

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CHASING BAD DEBTS

• Has the Limitation Period expired?
• Six years, after this date it will be time barred
• What is the cause of action and are
• there any possible defences?
• Terms and conditions.

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CHASING BAD DEBTS

• Letter Before Action
• Letter to the debtor requesting that money is
  paid within 7 / 14 days

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CHASING BAD DEBTS

• STEP 2 - Issuing the Claim
• Claim form (including Particulars of Claim)
  completed and filed with your local County Court
  or on line.
• (http//www.hmcourts-service.gov.uk/onlineservices
  /mcol/index.htm)
• Dont forget the Court fee!

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CHASING BAD DEBTS

• Details contained within Particulars of Claim
• Should contain the following information-
• Parties
• Invoice number date
• Amount outstanding
• Any amounts already paid
• Interest
• Costs
• Do not forget to sign the statement of truth!

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CHASING BAD DEBTS

• Interest
• County Court rate of 8 per annum from date that
  payment accrued to you.
• e.g. 500 (debt) multiply by 8 divided by 356
  0.10 (interest per day)
• Interest per day (0.10) multiply by 50 (days
  from date of invoice till day of filing claim
  form) 5.47 interest claimed per day

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CHASING BAD DEBTS

• Interest
• Contractual rate
• This should be stated on the invoice or in your
  Terms and Conditions of business

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CHASING BAD DEBTS

• Interest
• The Late Payment of Commercial Debts (Interest)
  Act 1998 amended by The Late Payment of
  Commercial Debts Regulations 2002
• Allows a small and medium-sized business to
  charge a higher rate of interest in respect of an
  outstanding debt against another small / medium
  business.
• The legal status of the business (i.e. whether it
  is sole proprietor, partnership, limited
  liability company) is irrelevant.

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CHASING BAD DEBTS

• What interest can be charged under this
  legislation?
• The rate of interest is the official dealing rate
  of the Bank of England (the base rate) plus 8,
  using the base rate at the end of the day on
  which the contract says payment is to be made.
  
• Important to note that you can not charge the
  interest on the VAT!

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CHASING BAD DEBTS

• Compensation arising out of late payment
• Additionally to the higher interest you will be
  able to claim compensation for the late payment.
• This is calculated at the following fixed rates-
• Debt less than 1,000 40
• Debt more than 1,000 but less than 10,000 70
• Debt more than 10,000 or more 100

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CHASING BAD DEBTS

• STEP 3
• Defendant responds to Claim Form Particulars of
  Claim
• The Defendant may-
• File and serve an admission
• File a defence in 14 days after service of
  Particulars of Claim or 28 days after service of
  Acknowledgement of Service
• Or file an Acknowledgement of Service within 14
  days after service of particulars of Claim.

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CHASING BAD DEBTS

• Default Judgment
• If the Defendant fails to file Acknowledgement of
  Service or a Defence the Claimant can obtain
  judgment in default.
• There is no need for a hearing / trial if default
  judgment request has been accepted.

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CHASING BAD DEBTS

• Admissions
• Any party to a claim could admit the truth of
  whole or any part of the claim.
• If the Defendant has requested time to pay (e.g.
  monthly instalments) you may accept the request
  and judgment would be entered for that sum.

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CHASING BAD DEBTS

• A Defence may be entered, if so the Defendant
  will be required to state those allegations
  that-
• He denies, his reasons for doing so and if he
  intends to put forward a different version of
  events from that given by the Claimant he must
  state his own version.
• He is unable to admit or deny but he requires the
  Claimant to prove.
• He admits.

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CHASING BAD DEBTS

• Allocation Questionnaire
• Once a defence has been filed the parties will
  receive an Allocation Questionnaire. The Court
  will inform you of the date by which this
  Questionnaire needs to be filed.

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CHASING BAD DEBTS

• Court Order after Allocation
• In a case allocated to the Small Claims Track,
  the Court Order will inform both parties when to
  send to the Court and the other party copies of
  Witness Statements and/or documents in support of
  their claim and or defence.
• The Order will also inform you of the hearing
  date and time (at least 21 days notice is given).

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CHASING BAD DEBTS

• The Hearing (Small Claims)
• No expert may give evidence.
• The Hearing will be informal.
• At the end of the hearing (half day) the Judge
  will immediately make his final judgment,
  including his order for costs (i.e. court fee,
  legal costs, travel expenses).

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ENFORCING JUDGMENTS

• Court Bailiff
• As the Court Bailiff to attend the judgment
  debtors home and or business premises to take
  goods to the value of the debt.
• This is a relatively quick and cheap procedure
• An application to instruct the Bailiff needs to
  made at the court where you put in your claim.
• Current court fee for 2007 is 95.00. This fee is
  reviewed by the court once a year.

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ENFORCING JUDGMENTS

• Charging Order
• This is extremely useful and effective if the
  debtor owns freehold or long leasehold property,
  in which case you are able to secure the debt
  against the property and therefore obtain an
  Order for sale to realise the debt.
• An application to charge the property must be
  made at the Court where you put in your claim.

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ENFORCING JUDGMENTS

• Third Party Debt Order
• If you know details of the debtors bank account
  with funds, the Court is able to order the bank
  to freeze the account to the level of the debt
  and order payment directly to you.
• An application to apply for a Third Party Debt
  Order must be made at the Court where you put in
  your claim.

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ENFORCING JUDGMENTS

• Attachment of Earnings
• If the debtor is employed then the Court can
  Order that his employer pays you a sum each week
  directly from his wages.
• An application to apply for an attachment of
  earnings must be made at the Court where you put
  in your claim.

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EFFECTIVE DEBT RECOVERY

• CONCLUSION
• The sooner you take CONTROL of the debt the
  greater the chances of you success.

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EFFECTIVE DEBT RECOVERY

• Should you have any questions please do
• not hesitate to contact-
• Mr Hugh Calloway
• Tel - 01983 527 878
• Email h.calloway_at_glanvilles.co.uk
• Miss Chantelle Kemper
• Tel [phone]
• Email c.kemper_at_glanvilles.co.uk
• Web www.glanvilles.co.uk