When do I need to consider a debt collection agency?
Having to take further action against a defaulting debtor is not just frustrating, it can feel uncomfortable, particularly when you're dealing with a customer who has previously had a good payment record. That's why leaving it to a good debt collection agency may be a smart move. They'll be experienced in handling things in the right way.
With the benefit of expert advice and support, you can also be sure you've explored every avenue. There's a range of enforcement options, including...
Can the debt be applied to a debtor's property?
Does your debtor own a property? If so, a charging order can be secured against the property and logged with the Land Registry. If the debtor owns the property jointly with someone else, the charge will be on their share of the property, often known as a 'restriction'.
What is a third party debt order?
Do you have the debtor's bank details? If so, you or your debt collection agency can apply for a third party debt order. It's a court order that freezes money owned by the debtor but held by a 'third party' such as a bank or building society. The debtor won't have access to the funds until the court makes a decision about whether the money should be paid to you.
The beauty of a third party debt order is the element of surprise. The debtor won't know about it before it's issued, so they won't have a chance to move funds.
Bankruptcy and insolvency proceedings
If you're sure the debtor doesn't have the financial means to pay the debt, you can start proceedings against them for bankruptcy or insolvency. This is a serious step, so having an experienced debt collection agency on your side will help you ensure you've done things by the book.
To start bankruptcy proceedings against an individual, the CCJ must be for at least £5,000. For insolvency proceedings against a company, it must be for at least £750.
The first step is to serve the individual or company with a statutory demand, setting out details of the debt and giving them 21 days to pay. If the debt isn't settled, a petition can be sent to the court – a bankruptcy petition for an individual or a winding up petition for a business.
After seven days the winding up petition can be advertised in the The Gazette and the debtor's bank account can be frozen, so there's a strong incentive for them to pay promptly.
A word of caution: in general the bankruptcy or insolvency route should be a last resort. The debtor may not have funds or assets to cover all of their debts, and because you're an 'unsecured creditor' there's no guarantee you'll receive the full amount you're owed.
What is an information order?
Before taking any of the above steps, you might simply want to find out what means and assets the debtor has. You or your debt collection agency can make an application to the court for an order to obtain information. The debtor will be ordered to come to court to be questioned about their finances under oath by a court officer.
At Redwood Collections we can help with all aspects of debt collection and help you grow stronger as a business. Not only can we provide expert advice and guidance. We can also relieve you of stress and hassle by handling everything for you.
Contact us to find out more.
