What to do if business debt recovery letters of claim are being ignored: Vicky Biggs

As a lawyer specialising in business debt recovery at Myerson Solicitors, it is pivotal to understand the importance of the initial step in the process: sending a letter of claim. This formal notice informs the debtor that legal action may be taken to recover the outstanding debt.

However, when faced with a debtor who remains unresponsive after receiving the letter of claim, it becomes crucial to explore further strategies.

One of these alternatives is the initiation of Court proceedings.

Hide Ad
Hide Ad

This typically becomes my course of action if the debtor either ignores the letter of claim entirely or fails to provide any valid argument as to why the debt is not owed.

Vicky Biggs offers her expert insightVicky Biggs offers her expert insight
Vicky Biggs offers her expert insight

This involves drafting a Claim Form and Particulars of Claim and filing them with the Court, a process that tends to prompt debtors to settle unless they present a credible Defence or Counterclaim.

If I find that the debtor fails to respond within the stipulated period of 14 days, I can apply for Default Judgment, allowing me to start enforcing payment of the debt.

However, in the event the debtor responds, my next steps would be guided by the way in which the debtor has responded to the court proceedings.

Hide Ad
Hide Ad

Alternatively, winding-up proceedings (also known as compulsory liquidation) can be commenced.

This is a strategy I can use if the debt exceeds £750, is not disputed, and is owed by another company.

I would initiate this process by serving a statutory demand on the debtor. This demand would contain detailed information about myself (the creditor), the debtor, and the outstanding debt, and give the debtor a 21-day time period to settle the debt.

In cases where the debtor does not respond to the statutory demand, this can serve as evidence of their inability to repay the debt.

Consequently, I can kickstart winding-up proceedings.

Hide Ad
Hide Ad

This, however, is a complex process involving the preparation and filing of several documents with the court, which is why I strongly advocate for the assistance of an experienced debt recovery solicitor to handle these proceedings.

Submitting a “winding-up petition" to the court is my formal application to close the debtor’s company.

When successful, this results in the sale of the debtor’s assets, the resolution of any ongoing legal disputes, the collection of any outstanding amounts owed to the debtor, and the subsequent distribution of funds to myself and other creditors.

However, the debtor’s financial status could limit the extent to which the debt can be recovered.

Hide Ad
Hide Ad

Winding-up proceedings are generally seen as a last resort, and in most scenarios, I find it more appropriate to consider other processes, such as issuing Court proceedings or engaging in alternative dispute resolution (ADR).

Nonetheless, if an otherwise solvent company adamantly refuses to pay an undisputed debt, I have the right to present a winding-up petition.

Courts have even acknowledged that, under certain circumstances, insolvency proceedings can be an effective tool for debt collection.

Vicky Biggs is a senior associate at Myerson Solicitors

Related topics: