You’ve done the work, you’ve sent your invoice, you’ve sent reminders, you’ve had promises of payment, but still no payment. What next?
Dealing with unpaid invoices is a time-consuming nuisance for businesses. For smaller debts, or cases where the paying party has no funds to pay, it is often disproportionate in terms of time and effort to try to recover them. However, if there is no dispute about the invoice and it is simply a case of delay, or the debtor prioritising other creditors over you, then the threat of legal action is the next stage.
A formal pre-action letter from a solicitor threatening court action is often enough to prompt a full payment or at least an offer of a payment arrangement. The pre-action letter can also include a claim for interest plus compensation and recovery costs under the Late Payment of Commercial Debts (Interest) Act 1998. If the letter results in payment by the debtor of the interest, compensation and recovery costs in addition to the debt, that will limit the amount it will cost you, and might in some cases cover all your recovery costs.
If the pre-action letter does not result in payment, it might at least prompt a response setting out that the debt is disputed, or asking for time to pay. This means that you are better informed about whether to pursue it and whether the debtor would defend or admit any claim, and whether you might agree on a settlement. (Our fixed costs for debt recovery do not apply to disputed debts.)
Having taken advice about the pros and cons of taking it further, the next step is to issue court proceedings and obtain a judgment for the debt. A claim form is prepared and can be filed at court either using Money Claims Online or on paper. The court fees are lower using the online service.
The claim is served on the debtor (usually by the court), who has a short period of time in which to acknowledge and either admit or defend the claim. If the debtor admits or ignores the claim, judgment can be sought for the debt, plus interest, fixed court costs, and compensation and recovery costs under the Late Payment Act.
If the claim is defended, it will no longer be an undisputed debt and would then progress towards a full trial. That process would vary depending on the value of your claim.
We offer fixed costs to advise and prepare a pre-action debt letter for undisputed business debts. We also offer fixed prices to issue court proceedings and obtain a judgment. Our fixed prices, plus details of all the interest/compensation/recovery costs you can recover from the debtor (which vary depending on the size of the debt), plus the court fees, are in our guidance leaflet.
Once you have a judgment in your favour, if the debt is still not paid you can then enforce it using one or more of the various court enforcement methods such as County Court Bailiffs, High Court Enforcement Officers, winding up, charging orders and more.
How can we help you?
If you need advice dealing with unpaid invoices, contact Sarah Coates-Madden.