Consequences of non-payment by a debtor
In the last 12 months the impact of late payments has cost UK businesses at least £51.5 billion! Late payments are having a serious impact on SME productivity and growth.
Fortunately, there are several solutions available to small businesses that help with late payment issues:
- Using a good credit control provider; Maintaining regular cashflow whilst reducing business risk should be a high priority.
- The use of a debt collection agency to recover aged debts.
The benefits of using a debt collection company include:
- Some provide a no win, no fee service.
- They have expertise, time and resources to hand which increase the chances of recovering your money.
- A fast, effective way to recover your debts.
However, here’s what happens when we can’t recover your money
If the debtor does not pay you after a Letter Before Action / Claim is sent, the next step is to begin legal action through the Small Claims Court.
The Small Claims Court submission fee varies depending on the debt amount owed to you.
See below:
| Claim amount | Paper form fee | Online claim fee |
| Up to £300 | £35 | £25 |
| £300.01 to £500 | £50 | £35 |
| £500.01 to £1,000 | £70 | £60 |
| £1,000.01 to £1,500 | £80 | £70 |
| £1,500.01 to £3,000 | £115 | £105 |
| £3,000.01 to £5,000 | £205 | £185 |
| £5,000.01 to £10,000 | £455 | £410 |
| £10,000.01 to £100,000 | 5% of the claim | 4.5% of the claim |
| £100,000.01 to £200,000 | 5% of the claim | You cannot make a claim online |
| More than £200,000 | £10,000 | You cannot make a claim online |
If you win your case in court the judge may instruct the debtor to pay your court fees.
If the debtor does not file a defence or if they admit that they owe the money, judgment is awarded, and the debtor is given a set amount of time to pay you. Should the debtor still fail to pay, you are within your rights to instruct bailiffs to recover your money.
If the debtor files a defence to your claim you must attend court, in which case a hearing fee is payable to the court. The hearing fee varies depending on the debt amount owed to you.
Hearing fee costs:
| claim up to £ | hearing fee £ |
| 300 | 25.00 |
| 500 | 55.00 |
| 1,000 | 80.00 |
| 1,500 | 115.00 |
| 3,000 | 170.00 |
| above | 335.00 |
| Fast track hearing fee | £545.00 |
| Multi-track hearing fee | £1090.00 |
Judgment Granted, what next?
You are perfectly within your rights to instruct bailiffs to recover your money if the debtor still doesn’t pay their bill after the judgment is granted.
To instruct bailiffs you are required to pay either £66 (for High Court Enforcement Officers or £77 for County Court Bailiffs). The good news is that the fee you pay is added to the debt amount by the bailiffs. The bad news is that if the bailiff is unable to collect payment from the debtor you will lose the fee you paid, and you may have to pay a £75 abortive fee to the bailiffs.
You can instruct county court bailiffs to recover your money for debts owing of up to £5000. However, for debts over £600 we always advise you instruct High Court Enforcement Officers (HCEO’s).
HCEO’s cannot enforce credit card, overdraft, personal or payday loan debts. But they can enforce business debts, utility debts, or old rent arrears.
In conclusion
Where bailiffs are unable to recover your money from the debtor it is costly for you. By this point you have paid the debt amount, the court fee, (possibly hearing fee), and the Writ fee. The judgment remains against the debtor’s name for up to 6 years though. So, it is always worth continuing to chase the debt outstanding, especially where the debtor has moved to a new home/premises.
The reason you should submit a claim to obtain judgment against a debtor is because you can make others aware that the debtor is a bad payer! If people complete credit checks before doing works for another business/person, they will see if that person has any County Court Judgments (CCJ’s) against their name or not.
Don’t forget, many debt collection companies who work on a “no win, no fee” basis will lose out too if the debtor does not pay you. When a debt collection company takes the risk to recover your money, it’s in their interest to get payment for you, because the consequences of non-payment result in them not receiving payment too.
For further advice on the formal debt recovery process from sending the letter before action to enforcement, please contact a member of our team today.