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The Debt Collection Process Explained

When it comes to the debt collection process, it can be divided into three main stages:

1. Late payment demand or letter before action

2. Court action

3. Judgement and Enforcement

Today we’re going to take a look at the debt collection process in more detail so that our readers can make an informed decision with all the information they need if they have to engage the services of a debt collection agency.

Late Payment Demand or Letter Before Action

In most cases, receipt of a formal letter to the debtor warning of court action if payment is not received within a certain time period will be enough to prompt the debtor to pay.  However, if the debt is still outstanding at the end of the allotted time period, the legal obligations have been met before proceeding with court action.  An alternative to a letter before action is a late payment demand.  This will allow you to claim compensation and interest and any reasonable debt collection costs under the Late Payment of Commercial Debts (Interest) Act 1998.  If the invoice is not paid (or is paid late), the Act and Regulations 2002 & 2013 enables you to charge interest at the annual rate of 8% above base rate for each day that the  invoice is overdue.  These regulations also entitle you to charge compensation to the debtor if an invoice is overdue by as little as a day.  The amount of compensation to charge will depend on the amount of the unpaid debt.

Court Action

If you’ve been through stage 1 and the debtor has still not paid, then it’s time to act quickly and issue court proceedings against them.  Once the court has served the claim form on the debtor they will have 14 days to admit and pay the debt or enter into negotiation to settle, or even defend the action.  The exact cost will depend on the sum owed to you by the debtor.

Judgement and Enforcement

If the debtor still does not pay the sum owed after issue of court action proceedings and has not filed a defence (or the defence was struck out), the next step is to issue a County Court Judgement (CCJ).  If the debt is under £600, the court will immediately instruct a local County Court Bailiff but if the debt is more than £600, the Judgement will be transferred to the High Court Enforcement Officer.  The Bailiff or Enforcement Officer will then visit the debtor’s premises in order to obtain direct payment or take control of goods to the value of the outstanding debt.

Here at Access Credit Management, we have the experience and expertise needed to guide you through all stages of the debt collection process.  We will offer you advice that’s tailored to your business needs and, what’s more, we operate on a no-win, no-fee basis so you don’t need to worry that the expenses incurred collecting the debt will leave you even more out of pocket.