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What happens when an agency can't collect a debt?

Debt collection agencies usually have high rates of success, but there will always be debtors who, despite the agency's best efforts, continue to refuse to pay. So, what happens next?

In many cases, putting your debt in the hands of a professional debt collection agency will pay dividends, ensuring you achieve settlement of the debt promptly. However, even the most experienced and well-respected agencies sometimes encounter situations where the debtor fails to respond and it's necessary to take things to the next level. This usually means legal or insolvency action.

In such cases, you could choose to recall the case and deal with any enforcement measures yourself, but that could be both complex and time consuming. Alternatively, you could simply write off the debt, which is something no business owner ever wants to do, unless there's no other reasonable course of action.

Fortunately, there's another way to go. It's an option that could save you a lot of time and hassle and ensure you don't have to forego the money you're owed. This simple solution involves relying on the debt collection agency's expertise and experience to support you in progressing the case. That way you can be sure things will be handled correctly and that you'll have the best chance of achieving a successful outcome.

Taking the legal route

A good debt collection agency will be able to advise you authoritatively on the legal options available to you and take care of everything on your behalf. The first step will probably be to send the debtor a 'letter before action', sometimes known as a 'solicitor's letter'. This will set out the amount you're owed, including any interest applied. It will also include a final deadline for payment, after which legal action will commence if the debt has not been settled in full.

This threat of legal action will often be enough to persuade a debtor to pay up. If not, the next step is to follow through on your promise and issue court proceedings. Most claims of up to £100,000 are dealt with via the County Court, with more complex or higher value claims going to the High Court.

If you make a claim via the County Court, and the Court rules in your favour but the debtor still doesn't pay, a County Court Judgement (CCJ) will be issued against them. A CCJ can seriously affect the credit rating and reputation of their business, so it's a strong incentive for the debtor to settle the debt promptly.

Taking the insolvency route

If your debtor is a business, the debt is for more than £750 and is undisputed, you can petition the Court for a winding-up order. In the case of an individual, if the debt is more than £5,000, you can present a petition for bankruptcy.

Before taking either of these actions, you would usually send the debtor a 'statutory demand'. This gives them 21 days to either settle the debt or agree a payment plan. If they fail to do either, you can then go ahead with filing the winding-up or bankruptcy petition.

Reliable legal and insolvency services

At Redwood Collections, we're highly experienced in pursuing legal and insolvency actions against both companies and individuals. We work with an expert panel of specialist solicitors and insolvency practitioners, who provide us with preferential rates to ensure we can offer you excellent value for money. With our valuable support throughout any legal or insolvency proceedings, you can take action confidently to help your business Grow Stronger.

Take the next step. Get in touch at info@redwoodcollections.com and we'll get back to you asap.

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