Debt Collection v Debt Enforcement.

01 May 2018

Debt Collection v Debt Enforcement.

When a customer doesn’t pay your invoice, what do you do? Probably send a chaser letter, a reminder invoice, maybe a letter after 30 days stating that payment is now overdue.

If the customer still fails to pay, it’s time to escalate the matter and look at Debt Recovery.

The term Debt Recovery is a wide ranging term, and covers Debt Collection as well as Debt Enforcement. But what do these terms mean and what is the best route for your business?

Iain Blundell, Solicitor in our Debt Recovery Team is here to assist with these queries:

“We assist businesses of all sizes to recover unpaid invoices. This would usually begin with a formal Letter of Claim setting out the basis of the debt and insisting on payment within 30 days. New regulations came into force in October 2017 which set out exactly what must be supplied to the debtor and how the letter and accompanying documents are to be set out. The Debtor is now given a period of 30 days within which to respond, and is asked to complete a formal Reply Form. Often this initial step will result in payment, or at least payment proposals coming from the debtor. However, if this doesn’t resolve the matter, it is time to consider issuing Court proceedings to seek a County Court Judgment (CCJ) against the debtor.

If Court action is needed, we have an expert team ready to assist. Swift action can be taken and we work to agreed Fixed Fees to ensure all work carried out is proportionate. Once a County Court claim is issued a debtor has an opportunity to pay the debt, or contest the case. Ultimately, a CCJ will be issued against the debtor, usually giving them 14 days to pay the debt in full. Often the debtor will pay at this stage, to avoid a black mark against their credit history. If they do not pay, it is time to move the matter on to the Debt Enforcement stage.

Debt Enforcement is the process of enforcing the CCJ. Enforcement action can be taken within 6 years of a County Court Judgment being issued. We can advise on the various options open to a creditor at this stage, and I have previously written articles about the following routes:

- A County Court Bailiff acting under a warrant of control.

- A Charging Order securing the debt against the debtor’s property.

- A Third Party Debt Order, freezing a bank account.

- An Attachment of Earnings Order securing repaying from the debtor’s income.

- A High Court Enforcement Officer (previously called a Sheriff) acting under a Writ of Control.

We would always look carefully at the debtor’s circumstances before advising which route would be the most appropriate way of securing payment for our client.

Debt Collection, and the use of a Debt Collection Agency, is a separate step that is often taken prior to Court proceedings. A Company may sell their debt to a Debt Collection Agency, or agree a deal whereby the Agency collects the debt on their behalf for an agreed percentage of what is recovered. Debt Collection is a process which involves letters, telephone calls, emails etc., and the Agents have no enforcement powers as such. They may attend at the Debtor’s address, but they do not have any powers to enter or to seize goods. They are there simply asking for payment. This is different to the position where a County Court Bailiff or High Court Enforcement Officer attend at an address as part of the Debt Enforcement stage. The Enforcement Officer does have powers to enter the address peaceably and take control of goods, and those goods can be seized if payment is not made and sold at auction.”

If you have any queries about Debt Recovery matters, please contact our team on 01254 297130.

Curtis Law Solicitors have offices across Blackburn, Lancashire and Greater Manchester and offer a free initial consultation.