What is the legal process for recovering commercial debt?

Unpaid invoices or unsettled lines of credit can be a huge burden for businesses, so understanding how the courts deal with commercial debt is vital.

This debt can stifle growth and threaten a business’s viability. However, from nudging late payers with a letter to dealing with High Court enforcement, there are several steps you can take to make sure your business is paid what it is owed.

Here is our essential legal guide to dealing with commercial debt.

What is commercial debt?

This is any unpaid amount owed by one business to another. It’s also known as business-to-business or B2B debt.

What can you do to prevent it?

There are some common sense things every business should do to prevent commercial debt getting out of hand.

Ensure your invoices are timely, accurate, and sent to the correct person, and ensure they are followed up with a credit control phone call to make your customer aware that they will need to pay promptly.

Look at your payment terms and reduce them from 30 days to 14 or seven if necessary. This will shorten the payment cycle.

Understand your client’s payment cycle and ensure your invoices comply with it.

What can you do before looking at legal options?

Make contact with your debtor, find out their situation, and discuss their ability to pay.

You may be able to come to an agreement about a payment plan which avoids the necessity of legal action.

It may simply be a matter of your debtor paying those who shout the loudest first.

What are the stages in the legal process?

There are five basic steps to take in law to recover your commercial debt:

  • Send them a letter before action – Your solicitor can do this for you. Often, this focuses the mind of your debtor and they move you up the payment schedule.
  • You start legal proceedings – If the debt is persistent, you can start legal proceedings. This can be in the County Court for smaller debts and High Court for larger debts. Details of your case should be written in a letter of claim which any commercial debtor must reply to in writing. The claim may be accepted or denied by your debtor.
  • The case comes to judgement – A ruling is issued by the court. If that ruling is in your favour, you can now move on to enforcement.
  • That judgement is enforced – Either your debtor will pay up now or you will have to engage enforcement agents to ensure the debt is paid. You can transfer a case from County Court to High Court for enforcement which gives you access to the greater powers of High Court Enforcement Officers. They visit your debtor, get them to pay or enter into a payment arrangement, or they can seize goods to the value of the debt.
  • You contact the receivers if there is a bankruptcy after a winding up petition from creditors – If the business has gone into administration, for example, you can contact the receivers to make them aware of the debts which is owed to you.

How could Inter Alia’s services help you?

Our commercial debt collection team can advise you of the best way forward wherever you are in these legal stages.

It may require a call-out to the debtor’s premises to discuss the matter, tracing debtors who have absconded, reconnecting with them, serving legal documents, or enforcing the orders of a court.

Do you need help with commercial debt? Call our friendly, expert team on 01495 781218 or arrange a call back here.