There are various options available to collect on a debt owed to you. But, the action you choose to take usually depends on how much money someone owes you and whether you can prove it.
DEBT RECOVERY: As a rule there are 4 options to recover debts owing to you by a person or by a business.
Your choices of financial recourse include:
Recovering debts owed to you is often complicated and costly.
In most cases, if a person or company fails to pay up, it is advisable to seek help from a professional debt collector.
You can also try contacting the individual or organisation that owes you the money. If so, you should speak with the person who has the responsibility of owing you the debt.
In some cases, you can avoid expensive court costs by making an informal agreement. It is almost always better to agree on a private plan to get the money repaid.
You have the option of writing a letter if the informal approach fails. A formal letter must inform the debtor of:
There is also some other important information to include in the letter, such as:
Note: Try to avoid getting drawn into lengthy correspondences or heated arguments. Also avoid threatening legal action unless you intend to follow it through.
Mediation is much like using an impartial 'referee' to settle a debt dispute. Mediation services have people trained in the recovery of debts. Mediators specialise in handling negotiations between two opposing sides.
Even though there may be a fee for mediation, it is usually cheaper than hiring a solicitor. It also quicker and often less stressful than taking court action.
In fact, the courts will often expect you to use some form of mediation service before they handle it. As a rule, the fee for a mediator gets based on the size of the debt.
If mediation fails, you can make a court claim to get your money back. In general, going to court to recoup a debt would be the last resort in most situations. This is partly because it can take months to get an outcome and there is no guarantee that you will win your case.
If the money owed is under £100,000 you can start a money claim online. That is providing the debt is not owed by more than two individuals or more than two organisations.
If you win your case the court can make an order to have the money paid back. But, if the other side is unable to pay (e.g. because of bankruptcy or not earning), it could be very hard to get back your money.
You can choose to make a statutory demand to request money that a person or business owes you. Ignoring the statutory demand, or if they cannot repay the money, means you can then apply to a court to:
The costs for making a statutory demand are high. You also have no guarantee of getting any of your money returned. Seek legal advice before you using legal options if someone owes you money and will not pay.
It is a complex process to get money owed to you by a bankrupt person or a company in liquidation. You would need to register as a creditor in a bankruptcy or liquidation. If there are any funds available to pay off debts, you might be able to get a share.
Important: You can get further information about registering as a creditor in a bankruptcy or liquidation on the GOV.UK website.
Legal Options If Someone Owes You Money and Won't Pay