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Somebody owes me money but is refusing to pay - what do I do now?
08 Jan 2018 Answered by Jenine Martin
So you’ve provided services or goods and your customer, despite chasing them, has not paid. What can you do? These key points should set you off in the right direction on the road to recovery!
You should have established at the outset of business who your customer is: Limited company or an individual. If you haven’t, do that now. You need to know who you are dealing with; you cannot claim against a company that does not exist.
Are your invoices addressed correctly? Are they being received? Call your customer and find out.
You need to be sure of why you have not been paid before you take legal action. Can your customer not afford to pay or are they refusing to pay? It is important to know.
It might be that your customer cannot afford to pay can you afford to consider instalments? The court process takes some time especially in regards to individuals, it may be that agreeing to instalments might get the debt paid faster than issuing a claim.
It is an altogether different matter if your customer is refusing to pay; try to establish why. Does your customer believe that there is something wrong with the goods or that the service has not been satisfactory? Can these issues be resolved without the need for a third party? Does your contract have a clause for arbitration or mediation?
If your customer is an individual, this includes ‘trading as’, before you issue proceedings you should send a formal letter before action which gives the customer 30 days to pay, to put forward a payment proposal or to raise a dispute. There is a prescribed response pack which must accompany this letter, along with any documents that you have relating to the contract and debt.
Limited companies should also be sent a letter before action for payment giving them at least 7 days to make the payment or to respond.
Always provide your customers with details as to how they can pay on your demand letters and a definite date by which to do so.
If there is no response to your letter before action or if you have been unable to resolve matters your next step is to issue a county court claim especially if the debt is disputed. You can instruct a solicitor to do this on your behalf, or you can draft a simple claim form yourself. A court fee will be payable and also solicitor’s costs if instructed. The court fee and fixed solicitor’s costs are added to the debt.
If your debt is not disputed, it is possible to initiate insolvency proceedings against a limited company and an individual. These courses of action should only be used when a debt is not disputed.
To discuss any debt recovery matters please contact Jenine at SRF on 0191 2320283