Guide to Debt Recovery

Managing debt is an area which concerns all businesses, whatever their size or market sector. In recognition of this fact, we aim to provide you with a complete debt management and recovery service, which includes offering credit reference searches. We also undertake pre-sue checks so that we can advise you of your debtors’ ability to pay should litigation be pursued.

To ensure that our service is both efficient and cost effective, we have formulated a debt recovery package, details of which can be found later in this brochure.

We may be able to deal with your whole case on the basis that payment depends on the outcome of the case.

This brochure sets out the steps and costs involved in pursuing a debt action either via the County Court or by following Insolvency procedures.

We can also advise you on steps you could take to minimise the risk of litigation, for example, by reviewing your standard terms and conditions of business.

Debt recovery in the County Court

Most debts are recovered following action taken in the local County Court.

As long as the correct information is forthcoming from the outset, this is a relatively quick and cheap way of pursuing a debt.

At Flint Bishop we have wide experience of handling debt collection through the Courts, including both the retrieval of one-off single debts through to large scale bulk debt recovery.

A typical timescale for pursuing an uncontested debt is as follows:

Day 1 Instructions received
Day 1 Seven day letter
Day 9 Issue Court proceedings
Day 30 Judgment in default
Day 31 Start process of enforcement

Our ability to work to this timetable will very much depend on your cooperation in providing us with information as requested.

What happens if I have got my Judgment?

Once you have obtained your Judgment, there are a number of options you can consider to recover the money you are owed.

You can instruct the County Court Bailiff to visit the Defendant’s property either to collect payment or to attempt to take away goods to the value of the debt for sale at auction.

The threat of losing valuable items such as a car, jewellery or electrical goods will often prompt a Defendant to settle the debt.

If the amount outstanding is £600.00 or more, you may instruct the High Court Sheriff (now known as the High Court Enforcement Officer “HEO”) to recover the money. The HEO operates in a similar way to a Bailiff but has greater powers in relation to commercial businesses. With some HEO’s it is possible to track repayment of the debt via the internet.

If it is believed that the Defendant owns a property in his or her own name then you may be able to apply for a Charging Order. A Charging Order secures the Judgment debt against the property in much the same way as a mortgage, but without the contractual repayments. If the property is sold then the secured debt must be paid out of the sale proceeds, assuming that there is sufficient equity.

If the Defendant owns a property jointly, e.g. with husband, wife or cohabitee, then it is possible to register the Charging Order. Usually the debt will be paid out of the sale proceeds, however in some cases, you will only be notified after the property has been sold, and whilst you can then pursue the Defendant further for the sale proceeds which they have received these may have been spent. Consequently, we suggest applying for an Order for Sale immediately upon obtaining a charge, depending upon the size of the debt and an assessment of the equity in the property. If the Defendant is owed money by a third party such as a business or a customer or has funds in a Bank or Building Society account then you may be able to obtain an Order of the Court that the money be paid to you directly by the Bank or by the third party. This is known as a Third Party Debt Order.

If the Defendant is employed it may be possible to obtain an Order to deduct a sum of money directly from their salary each week or month until the debt is repaid, this is know as an Attachment of Earnings Order.

If nothing is known about the debtor’s financial circumstances then you can apply for an Order that the debtor or officer of the company – if the debtor is a company or business – attends Court to give full details of their situation. A penal notice is attached to the Order for Attendance, so if the Defendant fails to comply they will be arrested.

Finally, it is possible to issue and serve the Defendant with a Statutory Demand threatening Bankruptcy or, in the case of Limited Companies, Winding-up proceedings. If the Defendant is a successful business person or company it is unlikely they will want to risk being made Bankrupt or Wound-up.

Fees for Debt Recovery

Flint Bishop Solicitors offers a standard debt recovery package, details of which are set out below. Depending on the volume of debt recovery that you require, we are always happy to negotiate individual packages to suit your needs, including a discount on rates.

The Debt Recovery Package for Uncontested Debts

Letter before action We are happy to issue letters before action without charge but will instead take a percentage share of the debt recovered. The percentages we will receive, inclusive of VAT are as follows:-

£1.00	-	£ 250.00	= 25%
£251.00	-	£ 500.00	= 15%
£501.00	-	£1,000.00	= 10%
£1,001.00	-	£2,500.00	= 5%
£2,501.00	-	£5,000.00	= 4%
£5,000.01		and above	= 3%

Some Clients, particularly those with very large debts do not find it advantageous to employ our No Win - No Fee service for letters before action. In those circumstances we are happy to individually negotiate the cost of a letter before action, which will typically be a fixed fee of £40.00 plus VAT for a single instruction.

What happens if recovery is not made following a letter before action?

If recovery is not made following the issue of a letter before action then the next step will be to issue a Claim Form, probably in the local County Court. In the event of you doing this, not only will the invoice sum be claimed but, in addition, a claim will be made for statutory or contractual interest, fixed Solicitors' costs on issue and the Court issue fee that is payable to the Court. Where debts are business to business debts, compensatory costs may be claimed in addition.

If it becomes necessary to issue proceedings in a County Court what will the charges be?

If proceedings are issued in the County Court then the claim will include all the items set out above, e.g. Court issue fee and statutory or contractual interest. If the debt is paid in full then the debtor will, in addition to paying the original invoice sum, also reimburse you for the Court fee paid and also pay the fixed Solicitors' costs on issue and statutory or contractual interest. In these circumstances we would keep the fixed Solicitors' costs on issue in payment of our fees plus a percentage of the monies recovered according to the scale set out above under the heading No Win - No Fee, letter before action.

What happens if no recovery is made?

In the event that no recovery is made then our charges will be limited to the fixed Solicitors' costs on issue. Examples of how the Scheme works are set out below:

Example One

On a debt of £600.00, letter before action issued and payment received promptly; our charges would be £60.00 including VAT.

Example Two

On a debt of £1,400.00, if payment is not received following the sending of a letter before action necessitating the issue of Court proceedings, then the costs will be as follows:-

Court issue fee (payable to Court) - £120.00.
Fixed Solicitors' costs on issue - £80.00

In this example, if the debt was paid in full we would be entitled to keep the fixed Solicitors'costs on issue of £80.00 which we recovered from the Debtor. In addition, we would be entitled to £70.00 including VAT for our success in recovering the debt.

Example Three

On a debt of £4,800.00, if recovery were made immediately following the issue of a letter before action then our charges would be £192.00 including VAT (not recoverable from the debtor).

Example Four

On a debt of £4,800.00, if recovery is not made following the letter before action necessitating the issue of Court proceedings then the costs would be as follows:-

Court issue fee (payable to Court) - £120.00 Fixed Solicitors'costs on issue - £80.00 In the event that recovery of the debt is made in full then our costs will amount to the Solicitors' fixed costs on issue of £80.00 recovered from the Debtor plus a percentage fee for our success in recovery of the debt amounting to £192.00, including VAT, which is not recoverable from the debtor.

If a debt should be discharged following the institution of Court proceedings then, whilst we will keep the Solicitors'fixed costs, any court fees paid and interest that is recovered as part of the Judgement Debt will be returned to you. The only cost to you will be our success fee in recovering the debt.

What happens if court proceedings are undefended and you are able to enter judgment against the debtor?

Firstly, you will be entitled to recover an amount of fixed costs for entry of Judgment, which we will charge to you and which are added to the debt and will be recoverable from the debtor. Costs vary from £22.00 to £55.00 depending upon the size of the debt. In the event that the Judgment is not discharged then it will be necessary to take enforcement action. The various methods of enforcing a Judgment are set out earlier. If we continue to feel that there is merit in pursuing the debt then we would continue to act for you in enforcing the debt on the basis that if we were successful in recovering the debt, following enforcement, we would be entitled to payment of a percentage, for our success, calculated in accordance with the scale set out earlier. This would be in addition to the Solicitor's fixed costs on the issue of the claim and the Solicitors fixed costs on entry of the Judgment. Certain costs associated with enforcement can be added to the Judgment Debt, for example, any Court fees, County Court Bailiffs' fees and High Court Enforcement Officers' fees as well as Solicitors' fixed costs allowed by the Court.

The current fees for the County Court Bailiff and High Court Enforcement Officer are set out below, together with Solicitors'costs, all of which can be added to the Judgment Debt and are recoverable from the debtor in the event of a success.

County Court Bailiff

Solicitors' fixed fee recoverable on instruction of Bailiff - £2.25
Court issue fee for instruction of Bailiff - £50.00

High Court Enforcement Officer (HEO)

Fee on transfer of action to the High Court for enforcement and Instruction of HEO - between £50.00 and £68.00 dependant upon which Group is instructed.
HEO's fee (see below) Solicitors' costs on instruction of HEO - £40.00

HEO's, Bailiffs' fees and Solicitors' fixed costs will be added, as we have already said, to the Judgment Debt and therefore there is nothing to pay if full recovery is made, other than our fee for our success in recovering the debt. However, with HEO's fees if recovery is not made or it is not made in full then the fees will increase according to the amount of time the HEO has spent pursuing the debt and, therefore, you may have something to pay.

It should be remembered that the instruction of a Bailiff or HEO is only one (although the most common) method of enforcing a debt. The other methods of enforcement are mentioned earlier in the brochure. The Court fees applicable will vary according to the type of enforcement action taken. We will advise you of the most suitable method of enforcement and the fees applicable if you choose an alternative method. When a HEO is instructed they will deal with transferring the Judgment up to the High Court from the County Court. Their initial fee for doing this is between £50.00 and £68.00 as above, which is made up of the Court fee and administration charges. Certain HEO's will waive the administration charge and just charge the Court fee as an incentive to instruct their office. The initial fee of £68.00 and fixed Solicitors costs of £40.00 are added to the debt and are recoverable from the Debtor.

The HEO will attempt to recover all amounts on the Writ, together with accruing interest, from the Debtor. The HEO's actual fees are in accordance with a scale and in the event of recovery have to be paid in full by the Debtor. If a HEO is not successful in recovering the monies you will be asked to pay an abortive fee. Most HEO's operate a fixed fee of £60.00 plus VAT in respect of this.

What happens if I do not wish you to deal with the County Court proceedings at all on a no-win, no-fee basis?

We are very happy to accept instructions from Clients who do not wish to deal with recovery of a No Win - No Fee basis. As we have already said, it is often not advantageous to do so if the debt is particularly large. In those circumstances, depending upon the complexity of the matter, you will be referred to a Fee Earner with the relevant experience for collection, who will make a charge agreed with you in advance.

Late Payment of Commercial Debts Regulations 2002

Statutory Right to Interest on Unpaid Business Debts

The Late Payment of Commercial Debts (Interest) Act 1998 gives some businesses a statutory right to claim interest if another business fails to pay its invoice(s) on time. The agreements to which it applies are those where both the buyer and the supplier are acting in the course of a business. The rate of interest which can be claimed is equivalent to the Bank of England base rate plus 8% per annum. The statutory rate is, therefore, substantially higher than the highest rate which a supplier would normally specify as a contractual rate of interest on late payments and significantly higher than the statutory rate allowed by the Court.

Since the coming into force of The Late Payment of Commercial Debts Regulations 2002 all businesses, irrespective of size and public sector bodies, can now claim statutory interest for the late payment of commercial debts. Businesses also have the right to claim compensatory costs in addition to fixed costs allowed by the Court. The scale of such compensatory costs pursuant to the regulations are as follows:-

Size of Unpaid Debt	Compensatory Costs Allowed

Up to £999.99	£ 40.00
£ 1,000.00 to £9,999,99	£ 70.00
£10,000.00 or above	£100.00

Whilst the aim of the Act is to deter late payment, the additional interest and additional compensatory costs which can be added to the Court fee and fixed costs already allowed on an outstanding debt, help compensate for inconvenience if you are forced to bring an action to recover a debt. Any additional compensatory costs recovered as a result of any action we take on your behalf will belong to you and will not be taken as our charges.

What happens if my claim is disputed?

If, once you have issued proceedings in the County Court, a Defence is received the Court will allocate the case to one of the following Tracks.

The Small Claims Track

The Small Claims Track is designed for cases which typically do not exceed £5,000.00 in value. The procedure for cases allocated to this Track is much simplified. Following allocation to the Small Claims Track the Court will issue appropriate Directions for the conduct of the action, which will usually lead to a final hearing before a District Judge within three or four months.

Unlike with the Fast Track or Multi-Track it is unusual in the Small Claims Track for the costs in employing a Solicitor to be awarded to the successful party.

The Fast Track

If your claim is valued at more than £5,000.00, it is likely to be allocated to the Fast Track.

The Fast Track is designed for handling civil cases which fall into the £5,000.00 to £15,000.00 bracket and can be dealt with at trial lasting less than five Court hours. When claims are allocated to the Fast Track, directions will be given setting out a timetable, which all parties must follow. A fixed trial date or a trial window of no more than three weeks will also been given.

The date of the trial will be no later than 30 weeks after allocation to the Fast Track and the timetable will be set for:

Disclosure of documents - 4 weeks
Service of Witness Statements - 10 weeks
Expert evidence - 14 weeks
Fixing the date of the trial or trial window - 22 weeks

The general rule relating to costs in Fast Track cases is that at the end of a Fast Track trial - unless any of the parties is publicly funded - the Court will make a Summary Assessment of costs of the whole claim. This will be made immediately after Judgment is given and will be based upon the signed Statement of Costs served by the parties.

The Multi Track

The Multi Track, as its name suggests, allows for various options as to how a case will proceed from allocation to trial. Unless the parties consent, the Court cannot insist that a claim worth more than £15,000.00 is placed onto the Fast Track.

It is usual for parties to agree Directions but these can be varied by way of Application. The Multi Track timetable tends to be more flexible than that of the Fast Track although there would be provisions made for disclosing documents, serving Witness Statements and providing expert evidence.

Costs in Defended Proceedings

In the event that an action started on your behalf becomes defended we will talk to you immediately about the costs of pursuing the matter to a conclusion. These costs could vary considerably depending on the size and complexity of the matter. In certain circumstances we may be prepared to deal with the matter on a No Win - No Fee basis, this does not mean that you have to share your damages with us but it does mean that we are entitled to recover a success fee from your opponents.

We will also provide you with comprehensive advice on other methods of litigation funding. A copy of our brochure entitled 'Funding Litigation' is available on request.

Insolvency Proceedings

Sometimes Insolvency Proceedings will need to be initiated to recover your money.

If a debt has been admitted, is undisputed or a County Court Judgment has already been obtained then a Statutory Demand can be served. We would endeavour to serve a Statutory Demand on the first day you instruct us.

A Statutory Demand is usually a pre-requisite to a Bankruptcy Petition or Winding-up Petition and gives the debtor 21 days to pay. An unsatisfied Statutory Demand is conclusive proof of an individual's or company's insolvency.

If, however, the debtor disputes liability, then he or she can apply to set aside the Statutory Demand within 18 days of it being served. If such an Application is made then the matter would be listed for a Court hearing and be given high priority.

To avoid any argument about whether or not a Statutory Demand has been received, it is usually advisable to personally serve the debtor with the document. This can entail instructing a Process Server, whose fees are usually in the region of £75.00 plus VAT. Should an Application to set aside a Statutory Demand fail, or the Statutory Demand is unopposed or remains outstanding and the debtor cannot pay, then on day 22 we will be able to issue a Bankruptcy Petition. The Petition would have to be issued either in the debtor's local Court or at his or her trading address and served personally. This would involve you paying a Court fee of £190.00 at the time the Petition is issued as well as the Official Receiver's Deposit of £370.00.

In the case of a Limited Company that is unable to meet its debts, a Winding-up Petition would be issued and served at its registered office. This would also incur a Court fee of £190.00 and the Official Receiver's Deposit of £620.00. Companies are often desperate to avoid this course of action as the Petition must be advertised before the hearing - something which can ruin their credit rating.

In both Bankruptcy and Winding-up proceedings, the Court will determine whether or not an Order will be made. Such a hearing usually takes place within one month of the Petition being served, but timescales largely depend upon the Court's list.

What happens once a Bankruptcy or Winding-up Order is made?

In the case of an individual debtor, a sealed Bankruptcy Order is sent to the Official Receiver as soon as it has been obtained. He will then register and advertise it in local newspapers and the London Gazette as he sees fit.

The Official Receiver will protect the Bankrupt's Estate and distribute the assets. Within 12 weeks of the Order being made he will appoint a Trustee in Bankruptcy and determine whether or not to summon a Creditor's Meeting.

Again, in the case of a Limited Company, a Winding-up Order is immediately sent to the Registrar who must publish the Notice in the London Gazette.

The Official Receiver would then be appointed to deal with all assets, debts and liabilities and, in certain cases, to investigate all the affairs and dealings of the Company and its Directors.

Within 12 weeks of a Winding-up Order being obtained, the Official Receiver must decide whether or not to summon a Creditor's Meeting with a view to appointing a Liquidator to deal with realising and distributing the Company's assets.

Timetable for Insolvency Proceedings

A typical timescale for Insolvency proceedings is as follows:

Instructions received - day one
Statutory Demand issued - day one
Application to set aside - 18 to 21 days after service
Bankruptcy/Winding-up issued - 22 days.
Bankruptcy/Winding-up Petition - heard by the Court after approximately two months
Trustee in Bankruptcy/Liquidator - Creditors' Meeting usually held within 12 weeks of the Order.

Fees in relation to Insolvency Proceedings

The legal costs associated with Insolvency proceedings are as follows:

Solicitors costs of issuing Statutory Demand - Up to £10,000.00 - £150.00 Plus VAT £10,000.00 up to £50,000.00 - £250.00 Plus VAT Over £50,000.00 - £300.00 Plus VAT
Cost of personal service of a Statutory Demand (if required) - £75.00 plus VAT
Solicitors' costs of Bankruptcy/Winding-up proceedings - £350.00 plus VAT
Court fees - £190.00
Official Receiver's fees - £370.00 for an individual; £620.00 for a Company

In certain circumstances, by individual negotiation, we may be prepared to take Insolvency action against a debtor on a No Win - No Fee basis.

Example One

Individual owes £7,500.00 and pays up on being served with a Statutory Demand

Legal costs associated with drafting the Statutory Demand - £150.00 plus VAT
Process Server's fee of Statutory Demand (if required) - £75.00 plus VAT

Total cost payable by you - £225.00 plus VAT

Example Two

Individual owes £7,500.00 but does not settle his debt until the morning of the Petition to make him bankrupt

Legal costs associated with preparing Statutory Demand - £150.00 plus VAT
Process server (if required) - £75.00 plus VAT
Legal costs associated with drafting the Bankruptcy
Process server's fees in serving Bankruptcy Petition - £75.00 plus VAT
Court fees upon issue of Bankruptcy Petition - £190.00 (no VAT)
Official Receiver's Deposit payable at the time the Bankruptcy Petition is issued - £370.00 (no VAT), which may be recouped

Total costs payable by you £1,323.75 including VAT and disbursements

Example Three

What happens if my debt is against a Limited Company?
In this case the costs set out would be exactly the same as in Example Two, the only difference being a charge of £620.00 (no VAT) for the Official Receiver's deposit in Winding-up a Limited Company. If Bankruptcy or Winding-up proceedings result in the debt being paid, we would look to recover the cost of the proceedings from the debtor.

How do I instruct Flint Bishop?

You can instruct us in the usual ways by telephone, fax, email or letter. You can also simply complete our contact form on this site

We would appreciate copies of any unpaid invoices upon which you wish to sue, so please fax them to us together with one of the debt recovery instruction forms on the fax number given.

How do I monitor progress of the Debt Recovery?

You may, of course, contact us at any time by phone or letter to enquire about the progress of the action. We will immediately up-date you by email with news of any developments relating to your matter. To make monitoring even more convenient, we can now offer online tracking by giving you a username and password to your own account from this website.

Derby Office:
Flint Bishop Solicitors
St Michael's Court
St Michael's Lane
Derby
DE1 3HQ
Tel: 01332 226 150
Fax: 0870 191 8679
Email: debtrecovery@flintbishop.co.uk

Nottingham Office:
Flint Bishop Solicitors
The Atrium
20 Wollaton Street
Nottingham
NG1 5FW
Tel: 0115 964 4450
Fax: 0115 950 8422
Email: debtrecovery@flintbishop.co.uk