Coronavirus: Debt Recovery – Should I issue proceedings?
This article will ask the question, are legal proceedings in the current climate appropriate as there has been much discussion surrounding this. The first thing to note is that most business are keen to avoid legal action at the best of times, and now we are in arguably one of the most uncertain times in modern history, this will ring more true. You should therefore make every effort to try to collect your outstanding balance without resorting to issuing proceedings, which is something we always do for our clients. We suggest contacting the debtor regularly, via email, phone or any other contact details you may have.
If after these attempts, there has been no response or payment it would be prudent to ask the following questions;
1. Is the debtor an ‘essential business’ and therefore open or are they affected by the lockdown and closed? If the latter, and your contact information is purely for the business (i.e. the business address, the business landline number) then it is plausible they have not received these letters or calls.
2. Did the debtor respond and say they were trying to access government schemes, such as the business interruption loan? If so, it may be prudent to hold on legal action for a couple of weeks to allow them to do this, but request proof of their efforts. Think about how it would look to a Judge if they asked for time and you did not oblige in the current circumstances.
3. Is the business on the brink of collapse or already in insolvency due to the crisis? This is where your internal tracking systems, such as credit agencies you may utilise, will come in handy. There is little point in pursuing a company whose chances of survival are slim or who have already collapsed.
4. Do you have the reserves to proceed with legal action? Do not forget that Court fees and solicitors’ costs are recoverable only where the debtor pays, so you will have to stand these yourself in the first instance until your or our efforts to collect the balance have yielded some fruit.
5. Was the debt incurred before or after the start of the pandemic? This could make a difference as to whether your claim is viewed as premature or not. The longer the balance has been due, the less likely it would be deemed inappropriate to bring proceedings.
This article is a very brief overview of the current considerations to have before issuing legal proceedings, however if you are considering whether or not to chase a debt, please get in touch with us at firstname.lastname@example.org for further advice.