You are owed money and you can see no other option but to take legal action to have it returned. The question is should you?
Before you go down this road, you really should ask yourself these questions.
Have you exhausted all other avenues?
Going down the road of litigation should definitely be the last choice on your list of options. It is risky and expensive. First you can try and recover the debt yourself and if that doesn't work you can go to a FCA approved professional. This will normally cost just a handling fee in the outset and an agreed commission on collection. The advantage of the route is that you can leave it with them and you can use your time to get on with servicing your other customers.
Do you see no future business relationship with your customer?
Sometimes a debt owed is part of a larger contract and the option of litigation must be weighed up against the 'bigger' picture. Here employing a FCA approved professional can be helpful by the use of '3rd Party' psychology. It does this by showing that you and your company is serious about debt recovery. It takes any emotion out of the process and makes everything much more 'business like'. Finally it moves the control of the situation to the impartial third party. Most of the time this is all it takes to resolve the situation.
Is the debt large enough?
A most important question you should be asking yourself? Being owed money can be emotional as well as financial. As we have already said, litigation can be risky and expensive. The expense is not only court costs, but cost in your time and legal representation. If the amount owed is considered 'small claim', these costs will normally be picked up by yourself.
Does your customer have sufficient assets?
I know this might sound really obvious, but there is no point starting legal action if your customer isn't in a position to pay the debt. A simple trace of their assets, before making any decision, can save lots of money later on, in what would be wasted legal action.
Is your customer still in business?
If you customer is no longer trading, for whatever reason, then although it is not impossible to recover monies via the courts, most options are very risky and exceedingly costly. Again a simple inexpensive trace can arm you with the required information to aid in any decision you might have to make.
Does your customer currently live in the UK?
If you client is not residing in the UK, then the option to pursue your debt through the English courts, using English Law might not be available to you? To take any legal action outside of UK jurisdiction will be more difficult.
Do you have sufficient evidence of the debt?
Again this might seem obvious that all paperwork regarding the transaction in question be in order. The better the evidence, the better the chance of a successful 'day in court'.
Is the debt undisputed?
If the debt is disputed by your customer for whatever reason, then any legal action is going to be more time consuming and therefore more costly. This should be sorted out via mediation before any legal action is contemplated.
Will you get paid even if you win?
So you go to court, get the judgment in your favour, your client has the assets and still refuses to pay, or only pays a small amount and then defaults? So your only options are more costly legal action or giving up, just more out of pocket then you were?
So... To sue or not to sue...?
Answering 'Yes' to all of the above questions does not guarantee success in court, but that also does not mean you should shy away from litigation as a viable option in the debt recovery process. However an option to consider, especially if your customer is a property owner with equity, is to proceed under the Insolvency Act of 1986, which we have found to be a much more cost effective alternative.
Wouldn't it be all so easy if customers just paid their debts on time?
By Kevin Bishop - Senior Partner at Town and Country Legal Services LLP