As a business owner there is little worse than a customer who refuses to pay your bills. Cashflow is the lifeblood of a business and late or non-payment can cause serious damage, or in the worst case put you out of business.
At Backhouse Solicitors our expert Debt Recovery team are here to help you collect the money you are owed. Whether you need a bespoke Letter Before Claim or a full bad debt ledger recovery we can provide a solution that fits you.
Solutions to Suit the Debt
Different types of debt need different approaches, so we offer two main solutions for chasing single undisputed business debts.
Package 1 – Letter Before Claim Only
Once you have exhausted your in-house credit control process the legal route always begins with sending a Letter Before Claim to your debtor. This is a final and formal demand for payment and it has to be sent to the debtor before a claim can be issued in the court. It must contain certain pieces of information which vary depending whether the debtor is a limited company or an individual (which includes sole traders/partnerships).
We charge a fixed fee for preparing and sending a Letter Before Claim to your debtor. The fee depends on whether you are happy to use our standard format letter or whether for a more complex case you would prefer us to tailor it to your unique circumstances which will involve going through all of your paperwork.
Our fees are:
- Standard Letter Before Claim £200 + VAT
- Bespoke Letter Before Claim from £250 to £1,000 + VAT
What services are included in this figure?
- An initial meeting with one of our solicitors to discuss your circumstances. Our free 30 minute consultation policy means that there is no charge if you would prefer to end the meeting during the first half hour. If we think that the debt is likely to be irrecoverable then we will tell you so you don’t waste your money
- Initial information gathering – collecting copies of the invoices, contracts, worksheets etc needed to substantiate the amount owed and to enable us to calculate interest and any compensation you will be claiming
- Either preparing a standard Letter Before Claim adding your details into our template, or preparing a bespoke Letter Before Claim tailored to the exact circumstances
- Sending the Letter Before Claim to the debtor on our letterhead
- Passing on any response to you
What services are not included in this figure?
Our Letter Before Claim service is designed as a solicitor’s letter to prompt a non-payer into action to avoid the court collection process. It doesn’t include:
- Follow up correspondence with the debtor about the debt or entering into negotiations on your behalf. These are chargeable at our normal hourly rates and we would of course discuss costs in advance and if required place a limit on the time we spend
- Issuing court proceedings for recovery – this is covered in Package 2
Package 2 – Legal Proceedings for Undisputed Debts
If a Letter Before Claim does not result in payment of the debt then the next step is to issue a formal claim in the County Court. We offer a no recovery no fee service which gives you the peace of mind that you aren’t incurring substantial legal fees before you receive payment.
If we are successful in recovering the debt for you our fees are:
- Debts up to £1,000 – 20% of the sum recovered (+VAT)
- Debts over £1,000 – 15% of the sum recovered (+VAT)
What services are included in this figure?
- Gathering any further information required for preparing the claim (collecting copies of the invoices, contracts, worksheets etc needed to substantiate the amount owed and to enable us to calculate interest and any compensation you will be claiming
- Preparing your County Court claim form, including the calculating the interest and compensation and discussing with you as necessary
- Submitting the claim form to the courts and paying the issue fee
- The debtor should submit an Acknowledgement of Claim to the court which will either accept the debt or dispute all or part of the debt. We will review the Acknowledgement when received and advise you what it says
- If the debt is accepted then the debtor has a limited time to pay the debt off or we will enter judgement to obtain a CCJ against them on your behalf. We will respond to any correspondence received and if they ask for a payment plan or more time to pay we will negotiate on your behalf
- If a CCJ is entered then we will instruct bailiffs to collect the debt on your behalf. If the debt is over £600 then we will instruct a High Court Enforcement officer as they have greater powers and are more effective than court-appointed bailiffs. We work with several bailiff firms and will recommend the one we believe is most likely to achieve a recovery in your case
- We will deal with all bailiff correspondence and if the debtor requests a payment plan we will discuss with you before accepting anything
- We will collect in the payments from the debtor or bailiff and pay them over to you
What services are not included in this figure?
Our no recovery no fee legal proceedings package is only designed to collect undisputed debts. If the debtor disputes the amount owed then this is likely to come up when they receive the initial Letter Before Claim and we would advise you at that point.
In some cases a stubborn debtor will ignore the Letter Before Claim and it is only when we start the Legal Proceedings process and issue the claim that they will submit a Defence form to the court to dispute some or all of the debt.
If your debtor disputes the amount they owe, or claims that they don’t owe it at all then you have to make the choice whether to litigate (go to court) to recover what you are owed. If you decide to litigate then we will charge our normal hourly rates for the work involved as litigation cases can vary widely in length and complexity. We will be happy to give estimates and agree limits for each stage but we will need to discuss fees with you regularly so you have the choice whether you wish to continue.
In some dispute cases the debtor may decide to issue a counter-claim against you which you would need to defend. Again we would charge an hourly rate for defending you against this claim.
Key stages and timescales for your case
We have outlined the key stages of a typical case above and here is a rough guide to the likely timescales involved:
- Standard Letter Before Claim – following our initial meeting we will prepare a client care letter the same or next day for you. Once this is signed and returned and we have the information we need from you to prepare the Letter Before Claim we will issue it the same day or next day if the information is received after 3pm
- Bespoke Letter Before Claim – following our initial meeting we will prepare a client care letter the same or next day for you. Once this is signed and returned and we have the information we need from you we will prepare a first draft of the letter within 24 hours and send it as soon as we have your approval
- Legal Proceedings package – once a Letter Before Claim has been sent to a company debtor they will have 14 days to respond after which we can issue your claim. The debtor then has 14 days to either acknowledge the claim or file a defence – if they do neither then we can request judgement against them. Entering judgement will take the court around 10 days after which we can instruct bailiffs. It will typically take bailiffs 8-12 to obtain the writ, contact the debtor, arrange a visit and start collecting money. If full payment is made immediately that will be the end of the matter, but where a debtor requests a payment plan, claims hardship or goes to great lengths to avoid the bailiffs then the process will take longer
Other Costs (also known as “Disbursements”)
During your Debt Recovery case we may need to make some payments to 3rd parties on your behalf. These are commonly called “disbursements” and we will add them onto your bill without any mark up. Disbursements will still be payable in our no recovery no fee package as they are not our fees and are necessary to progress your case.
For Debt Recovery cases, these costs could include:
- Court claim issue fees – these scale with the size of the debt you are claiming. Claims up to £100,000 will normally be issued online and the fees range from £25 up to £4,500. Claims over £100,000 will cost 5% of the debt, capped at £10,000
- Tracing fees – if we need to trace a missing debtor, tracing agents typically charge from £50 upwards
- Process serving fees – if we need to serve documents in person a process server will generally cost around £100
- Bailiff fees – it costs £66 to instruct High Court Enforcement Officers. They pay this to the court to obtain a Writ of Control which enables them to take on the debt. They then charge staged fees to the debtor depending on how long it takes to recover the money – longer means more expensive. If they recover money their fees are added onto the debt and paid off by the debtor. If they are unable to recover any money they will charge an “abortive fee” which is £75+VAT for most bailiff firms
Our Litigation and Debt Recovery team
Minal Backhouse – Head of Employment and Litigation
Experience: Minal is a solicitor with over 20 years experience giving advice on litigation and debt recovery. She has worked in practice and industry and assists businesses with litigation, contractual and employment law issues.
Percentage of time spent on Litigation law: 10%
Charge out rate (where applicable): £250/hour
Jane Harrington – Associate Legal Executive
Experience: Jane has worked in debt recovery for over 4 years looking after businesses from sole traders up to multinationals. She is experienced in volume undefended debt collection and litigating to collect more complex defended debts.
Percentage of time spent on Debt Recovery and Litigation law: 100%
Charge out rate (where applicable): £100/hour