Summary of Litigation and Enforcement Options

Here you can download our Summary Of Litigation And Enforcement Options booklet. An example of the useful information you can find in the booklet is featured below.

 

1. Summary of Litigation Options

We are often asked by our clients what the appropriate procedure is for collecting unpaid invoices when it becomes clear that a particular customer refuses (for whatever reason) to pay an overdue debt

There are two main ways in which to collect debts in this country.

One is using what may be termed “insolvency” based recovery routes. The other is using the more “traditional” recovery routes. There are advantages and disadvantages to both, although if it is possible to use it, the insolvency recovery route often provides the quickest and most cost effective means of recovery. However, the insolvency route should only ever be used in cases where there is no genuine dispute between you and your customer as to the performance of the contract itself and the debt in question must be over £750.

Set out below is more detail regarding the insolvency and traditional recovery routes. To summarise:-

  • Insolvency routes consist of Statutory Demands, Bankruptcy Petitions and Winding up Petitions
  • Traditional recovery routes consist of claims in the Small Claims Court, the County Court and the High Court.

Insolvency Recovery Methods

2. Statutory Demands

1. What are they?

Formal demands for payment under the Insolvency Act 1986. They are not court issued documents.

2. Who can they be used against?

Both limited companies and individuals

3. When can they be used?

When the debt to be collected is £750 or more

When the debt is overdue according to the payment terms between the parties

When there is no genuine dispute as to the underlying contract of supply

4. How much do they cost?

There is a process sever fee – commonly between £50 - £100

Solicitors Costs – Please contact us to discuss fixed costs

5. What is the next stage if the debt remains unpaid?

Against a company you can issue a winding up petition

Against an individual you can issue a bankruptcy petition

6. Advantages of a statutory demand

Speed – if the debtor fails to pay within 21 days from the date of service, you can issue a winding up petition or bankruptcy petition as appropriate

Cost – is it generally a cheaper option than pursuing a claim through the traditional routes

Severity – it is a very strong threat to either a company or an individual. Failure to comply could result in the individual going bankrupt or the company being wound up.

Even if the debt isn’t paid in full, the use of a statutory demand normally results in settlement of the debt without prolonged litigation.

7. Disadvantages of a statutory demand

Care needs to be taken to ensure that the debt is not disputed. If a demand is issued where there is a genuine dispute, it can be set aside by the court and you will be liable to pay the debtors legal costs which could be high.

If the debt is paid in full, there is no legal right to get your costs paid (although we always try).

3. Bankruptch Petitions

1. What are they?

Court issued documents which seek the bankruptcy of an individual for failure to pay an overdue debt.

2. Who can they be used against?

Individuals only

3. When can they be used?

Following the failure by an individual to respond to a statutory demand, or the failure by an individual to successfully set aside a statutory demand

4. How much do they cost to issue and serve?

Process server fee – between £50 - £100

Court Fee – £927 (£700 of which is refundable)

Solicitors Costs – Please contact us to discuss fixed costs

5. What is the next stage if the debt remains unpaid?

You can bankrupt the individual concerned at court and appoint a Trustee in Bankruptcy over his assets (whose role is to then sell any assets and distribute the proceeds to the creditors). A Trustee in Bankruptcy will collect in all assets of the bankrupt and make a distribution to creditors of pence in the pound.

6. Advantages of a bankruptcy petition

Threat – it is a very strong threat as failure to pay can end in bankruptcy.

Cost – if the debt is paid following issue of a bankruptcy petition, you are generally entitled to recover all your legal costs from the debtor as well.

Even if the debt isn’t paid in full, the use of a bankruptcy petition normally results in settlement of the debt without prolonged litigation.

It cuts straight to the issue of the ability of the debtor to pay the debt and avoids all the expense of traditional litigation processes first.

7. Disadvantages of a bankruptcy petition

Failure to pay results in bankruptcy – and it is uncommon that a debtor then has sufficient assets to pay the creditors off.

4. Winding Up Petitions

1. What are they?

Court issued documents which seek the winding up of a company for failure to pay an overdue debt

2. Who can they be used against?

Companies only

3. When can they be used?

Any time a debt is overdue (but more commonly they are issued following the failure of a debtor to respond either to a letter of demand for payment or a statutory demand).

4. How much do they cost to issue and serve?

Court Fee - £1,392 (£1,165 of which is refundable)

Process Server Fee – £50 - £100

Company House Search Fee - £4

Solicitors Costs – Please contact us to discuss fixed costs

5. What is the next stage if the debt remains unpaid?

The debtor company can be wound up if you wish

6. Advantages of a winding up petition

Threat – it is a very strong threat as failure to pay can end in the debtor being wound up.

Cost – if the debt is paid following issue of a winding up petition, you are generally entitled to recover all your legal costs from the debtor as well.

Even if the debt isn’t paid in full, the use of a bankruptcy petition normally results in settlement of the debt without prolonged litigation.

It cuts straight to the issue of the ability of the debtor to pay the debt and avoids all the expense of traditional litigation processes first.

7. Disadvantages of a winding up petition

If the company is wound up, the prospects of recovery are generally very low and you are only likely to receive a dividend payment of pence in the pound (but remember it is the threat of the consequences rather than following through which is vitally important).

If the company is wound up, you do not get your court refund back of £1,165

If a petition is wrongly issued in circumstances where a debt is disputed, then you can get heavily penalised in costs.

IN ORDER TO FIND OUT MORE ABOUT THIS SUBJECT AND THE ANSWERS TO THE QUESTIONS LISTED BELOW, DOWNLOAD OUR HANDY TIPS BOOKLET HERE.

ALTERNATIVELY, CONTACT THE TEAM ON 020 7841 0390

Traditional Recovery Routes

5. High Court, County Court and Small Claims Court

Enforcement Options

6. Warrant of Execution

7. Information Order

8. Charging Order

9. Attachment of Earnings

10. Third Party Debt Order

Should you require any further assistance at all with these matters, then please contact one of our corporate specialists on 020 7841 0390 and we will be happy to discuss this with you.