Is your debtor worth suing?

07 August 2017

Does your business have unpaid invoices?  Debtors?  Cash-flow problems?

Is it worth issuing Court proceedings?  Is it worth incurring the costs of pursuing a County Court Judgments (CCJ)?

Iain Blundell, our Debt Recovery and Litigation Solicitor, looks at the various factors which should be considered before incurring the costs, or spending the time, to proceed with legal action for recovery:

“The obvious first question to consider is whether you have good prospects of winning the claim.  Let’s assume that you do – the work you carried out, or the product or service you provided, was of a good standard and the invoices raised are valid. 

The next consideration is again usually quite obvious: what is the claim worth and how much will it cost to pursue.  It is clearly not worth pursuing a debt of £10 when the costs incurred are going to be hundreds.  Your Solicitor will again advise you on the need to consider the proportionality of the costs likely to be incurred.  Again, let’s assume that it is worthwhile running the claim.

The next list of factors to consider – and the ones I am concentrating on within this article – are whether it is likely that you will ever get any money out of the debtor, even after winning the court claim.  Obtaining a CCJ can sometimes only be the first step: When the Debtor fails to make payment as ordered, are you able to successfully enforce the Judgment and get your money back?

The questions to ask include:-

  •          Does the Debtor have any assets?
  •          Any employment or other income?
  •          Do they own property or land?
  •          What other debts do they have?
  •          Do they have any business interests?
  •          Where are their assets held, in a bank, abroad, are they liquid?
  •          Are they owed any money by others?
  •          Are there any other Judgments against them?
  •          Have there ever been any bankruptcy or insolvency proceedings?
  •          Are they insured?

It is crucial that these factors are carefully considered, otherwise there is a real risk that you spend time and money obtaining a Court Judgment against a debtor, only to discover that you are unlikely to recover those costs or the original debt. 

Your Solicitor will be able to discuss these issues with you, and will be able to take steps to find out any information that is missing.  I am able to, for example, very easily check records with Companies House, the Land Registry, the Insolvency Service etc.

There are also other weapons in a Solicitors arsenal that can assist in obtaining information about a debtor.  One of these is by compelling the Debtor to attend at Court and provide information about their financial circumstances.  This carries the weight of a criminal offence if not complied with and can be very useful. 

Once a clear picture has been painted of the debtor’s circumstances, it should be possible to consider whether recovery is likely, and also, crucially, which enforcement method will be the most productive.  Your Solicitor will again be able to advise you on these options:

  •          Will a Charging Order assist?  Yes if the debtor owns property.
  •          Will an Attachment of earnings Order be the most appropriate route?  Perhaps, if the debtor is employed.
  •          Will the Bailiffs or Sheriffs be able to get results?  If the debtor has assets, then probably yes.
  •          A Third Party Debt Order will help where the Debtor has bank savings. 

(Separate articles about each of the various enforcement methods have been published previously on the Curtis Law website.)

The main piece of advice I would give to any business before instigating court action would be to take the time to think about the Debtor.  It is usual to think carefully about the costs and the merits of the claim, and all too easy to press ahead without first taking quite a rounded view of the likelihood of recovery.”

If you have any questions about Debt Recovery, or about the various enforcement methods, please speak to our expert team on 01254 297130.