The stages of debt recovery
When a client approaches us with a debt to recover we regularly get asked; what are the steps? how long does it take? and how much will it cost?
This guide provides a useful overview of each of the stages of debt recovery, a glossary of key terms and the cost implications of each stage so you can decide what is the best course of action for you. If you have any questions, please let us know.
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A formal letter before action (“LBA”) is sent to the debtor threatening legal proceedings if the debtor fails to make payment within the number of days permitted (usually 14 days).
For a fixed fee of £50.00 plus VAT, we will send a letter before action to the individual or organisation that owes you money. Interest is claimed under the ‘Late Payment of Commercial Debts (Interest) Act’ for each qualifying debt (currently 8% above the Bank of England base rate) and compensation is claimed at the following rates:
| Qualifying Debt Value | Compensation |
| Up to £999.99 | £40.00 |
| From £1,000 to £9,999.99 | £70.00 |
| Over £10,000 | £100.00 |
If, after receiving the LBA, you would like us to liaise with the debtor and negotiate payment terms, before you commit to issuing court proceedings, we will undertake this work at our standard hourly rate of £200 plus VAT for letters in/out, telephone calls, e-mails etc. between ourselves/yourselves, the debtor and any other party.
If the debtor does not respond to the LBA or you are not able to negotiate your payment terms and you wish to commence court proceedings, we will charge you the fixed court fees and fixed solicitors costs (which are determined by the value of the claim) referred to below.
| Debt (Inc Interest & LPC) | Court Fee | Fixed Costs |
| Up to £300 | £35.00 | £50.00 |
| £301- £500 | £50.00 | £50.00 |
| £501- £1,000 | £70.00 | £70.00 |
| £1,001- £1,500 | £80.00 | £80.00 |
| £1,501- £3,000 | £115.00 | £80.00 |
| £3,001- £5,000 | £205.00 | £80.00 |
| £5,001- £10,000 | £455.00 | £100.00 |
| £10,001- £200,000 | 5% of the value of the claim | £100.00 |
| Over £200,000 | £10,000 | £100.00 |
If the Defendant fails to file an acknowledgement of service or defence, we can then enter judgment for which you will be charged the fixed costs referred to in the table below.
| Amount of judgment | Fixed costs |
| £25 – £5,000 | £22.00 |
| Over £5,001 | £30.00 |
If the debtor fails to pay the judgment debt you may then proceed to enforcement. There are various methods of enforcement, the costs, advantages and disadvantages of which we can discuss with you on a case-by-case basis.
This can take approximately four weeks. High Court Enforcement apply for a Writ of Control and write to the debtor giving seven days notice to make payment, failing which an officer will make an attendance. Below are the court fees and fixed costs you will incur:
| Amount Of Judgment | Court Fee (Non Variable) | Fixed Costs |
| £25- £600 | £100.00 | £2.25 |
| *£600 + | £78.00 | £51.75 |
*High Court Enforcement Officer’s charges are usually recovered from the debtor, if they pay in full. If no monies/possessions are received by the sheriff, then an abortive charge of £75.00 plus VAT is usually incurred.
- LBA – A Letter Before Action (“LBA”) is a formal letter sent to the Debtor threatening legal proceedings if the Debtor fails to make payment within the number of days permitted (14 days for a Debtor company or 30 days for an individual Debtor or Sole Trader).
- Debtor Company – Limited or Ltd company.
- Individual Debtor / Sole Trader – An individual person or a person trading as a business.
- Issue Court Proceedings. If the Debtor does not respond to the LBA, or you are not able to negotiate your payment terms, you may decide to commence court proceedings against the Debtor.
- Company Liquidation. Also known as the winding up of a company. This is an insolvency procedure which involves the assets of a company being realised and distributed to creditors by the Liquidator / Bankruptcy. An insolvency procedure, commencing with a bankruptcy order, made against an insolvent individual Debtor. The bankrupt’s assets form their bankruptcy estate, which is realised and distributed to creditors by a trustee in bankruptcy. The bankruptcy will be under the general control of the court.
- An Acknowledgement of Service provides the Defendant with 14 additional days to file a Defence, making a total of 28 days from the service of the Claim Form for the Defendant to file a Defence.
- If a Defence is filed, we may decide with your instruction, to refer the claim to one of our solicitors in our dispute resolution team. This will be determined on a case-by-case basis and the solicitor acting on your behalf will discuss costs and risks when instructed.
- If the Defendant fails to file an Acknowledgement of Service or a Defence within 14 days of service of the Claim Form, we can then request for the court to enter Judgment. Judgment in Default is also known as a County Court Judgment or CCJ.
- If the Debtor fails to pay the Judgment debt, you may then proceed to enforcement of the Judgment. There are various methods of enforcement which can be utilised depending on whether the Debtor is a company or an individual or Sole Trader.
- High Court Enforcement apply for a Writ of Control and write to the Debtor giving 7 days’ notice to make payment of the Judgment, failing which an officer will make an attendance. The High Court Enforcement Officer’s charges are usually recovered from the Defendant, if they pay in full. If no monies or possessions are received by the Officer, then an abortive fee is usually incurred.
- Company Liquidation. Also known as the winding up of a company. This is an insolvency procedure which involves the assets of a company being realised and distributed to creditors by the Liquidator.
- For a Third Party Debt Order, monies owed to a Judgment Debtor that are held by a third party (for example, a bank the Judgment Debtor has a bank account with) are frozen and seized for the benefit of the Judgment creditor.
- For an Attachment of Earnings Order, a proportion of a Judgment Debtor’s earnings is deducted by their employer and paid to the Judgment creditor until the Judgment debt is paid.
- A Charging Order is a way of securing a Judgment by imposing a charge over the beneficial interest in land, securities or certain other assets of a Judgment Debtor. In order to realise funds to satisfy the Judgment debt, the Judgment creditor may also be required to obtain an order for sale.
How we can help
Recovering debt from a business or individual who owes you money can be a frustrating, time-consuming, and challenging process. It can also negatively impact your cash flow and disrupt your business operations. If you find yourself in this situation, hiring a debt recovery solicitor can help expedite and streamline the process of recovering the owed funds.
Unpaid debts can hinder your business by disrupting cash flow, creating uncertainty, and ultimately, impede you paying staff and/or creditors as may damage your reputation. It is essential for any business to ensure that transactions are conducted on your terms.
Our debt recovery team is effective and focused on delivering the results you need. As specialists in invoice debt recovery, we have a dedicated team that handles debt cases on a fixed-fee basis, ensuring excellent value for money. Get in touch to find out how we can help you.
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