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Answering the most frequently asked questions about debt collection

Below, we’ve collated a list of some of the most frequently asked questions regarding B2B debt collection, as well as links to blogs where you can find out even more.

If you have a question that isn’t answered here, click here to submit your own.

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Not having a signed contract doesn't excuse non-payment.

In the absence of a written agreement, pursue recovery using the legal principle of 'unjust enrichment.' This means that no person or company should be able to profit at another's expense without making restitution for the reasonable value of any goods, services or other benefits that have been supplied to them.

You could start by contacting the debtor to resolve any issues, then send a detailed letter outlining the verbal agreement, work description, and payment terms.

If the debt persists, consider legal action, starting with a 'letter before action' or court proceedings if needed.

For undisputed debts over £750, a winding-up order may be pursued.

Professional assistance from a debt collection agency, skilled in both recovery and legal processes, can greatly facilitate the resolution.Top of Form

Find out more in our blog: https://www.redwoodcollections.com/blog/what-if-a-debt-is-overdue-and-no-written-contract

While there is no definitive answer, you can introduce a debt collection agency as soon as an invoice is overdue. It is a good idea to limit the number of invoices that are unpaid for 90 days, to avoid cash flow issues.

Or, if your resources are limited and a non-payer has gone AWOL, you could consider instructing a debt collection agency to trace and investigate at this point instead. It could even be when multiple customers start failing to pay.

Read more on this topic in our blog: https://www.redwoodcollections.com/blog/when-to-call-a-debt-collection-agency

When a debtor has no current address, it's crucial not to write off the debt immediately. Instead, consider seeking professional help from a debt collection agency (DCA) experienced in debtor tracing.

DCAs can use various methods, such as searching electoral rolls, financial data, and online platforms.

If the initial trace is unsuccessful, additional avenues like SMS messages, phone calls, emails, and research through online directories and social media can be explored.

In extreme cases, legal proceedings can be initiated by serving documents at the debtor's last known address.

For overseas debtors, a reputable debt collection agency with international partnerships can navigate the complexities and conduct effective tracing activities.

Read more on this topic in our blog: https://www.redwoodcollections.com/blog/how-do-you-chase-a-debtor-when-they-have-no-current-address

To initiate the debt tracing process or perusal of a debt all you need to provide is the invoice, contract, or confirmation of a verbal agreement, along with the debtor's name and their last known address.

Yes, we can.

A County Court Judgment (CCJ) is a legal ruling issued by a county court against an individual or business that fails to repay a debt.

It can be applied for by creditors to recover what they are owed, and debtors have four options: pay the full amount immediately, pay later or in instalments, dispute the claim or amount owed, or claim against the creditor if they believe they are owed for breach of contract or similar.

There’s more information on CCJs in our blog: https://www.redwoodcollections.com/blog/what-is-a-county-court-judgment

International debt collection involves a two-stage process.

Initially, a professional debt collection agency operates from the UK, attempting contact through calls, texts, and emails during the debtor's business hours.

If unsuccessful, the agency engages a local partner in the debtor's jurisdiction, leveraging their understanding of local language, culture, and legal protocols. This localised approach increases the likelihood of debt recovery.

The agency then assesses the feasibility of legal action, considering whether proceedings should be initiated in the UK or overseas based on contractual terms. If legal action is deemed necessary abroad, the agency's local partner provides expert support, ensuring compliance with local legislation for a successful outcome. 

There’s more information on how international debt collection works in our blog: https://www.redwoodcollections.com/blog/how-does-international-debt-recovery-work

No, not always.

Having a County Court Judgment (CCJ) in your favour doesn’t necessarily mean your debtor will instantly pay you. In many cases, it will have the desired effect and result in the debtor paying the full debt immediately or reaching an agreement of payment by instalments. But some debtors will continue to bury their heads in the sand.

Debt collection agencies typically do not have a minimum invoice value for pursuing a debtor, leaving the decision down to the creditor.

While some agencies may charge a handling fee for debts below a certain amount, factors beyond cost, such as principles and reputation play a role in deciding whether or not to chase a small debt. Additionally, the nature of the debtor, whether a one-time buyer or a regular customer, influences the decision.

Redwood Collections, for instance, handles debts of any size but charges a fixed £50 handling fee for debts under £500.

Read more in our blog: https://www.redwoodcollections.com/blog/what-is-the-smallest-debt-a-collection-agency-can-chase

You can search the government's free Companies House register or the London Gazette if you’re looking for an insolvent or bankrupt company. These websites offer free information on a company's insolvency status, including filing of insolvency-related documents. Examining the company's financial statements and notices on these platforms can provide insights into its financial health.

Read more about ways to find out if a business is in financial trouble in our blog: https://www.redwoodcollections.com/blog/five-warning-signs-that-a-business-is-in-financial-trouble

Providing the debtor is a business, you're legally entitled to recover reasonable debt collection costs by adding them to the value of the outstanding debt. The amount you can charge ranges depending on the sum of the debt.

You are entitled to charge an amount over and above one of these fixed sums if you can prove that it doesn't cover the reasonable costs of recovering the debt.

You can also charge the debtor interest on the outstanding debt. The interest rate you can levy is fixed at 8% above the Bank of England base rate.

The other way it’s possible to recover your costs is if you have a recoverable clause in your terms and conditions. If you are unsure whether you have this, a reputable agency will be able to advise you and offer a service to update this for you so that you are protected in the future.

Debt collection costs vary based on your preferences. Opting for a commission-only approach with a 'no collection, no commission' guarantee ensures affordability without upfront fees, increasing the chances of recovering the majority of the debt.

The flexibility to avoid long-term contracts and access additional services like legal advice and insolvency proceedings adds value to the overall cost-effectiveness.

Recoverable debt collection costs can vary depending on the debt's value and can be passed on to the debtor.

The interest you can charge on the outstanding debt is currently fixed at 8% above the Bank of England base rate.

Compared to legal professionals, debt collection agencies often offer a more cost-effective solution, for example, our 15% commission rate.

Find out more in our blog: https://www.redwoodcollections.com/blog/how-much-does-debt-collection-cost

When a company that owes you money goes through the process of liquidation, it means that the company is selling off its assets to pay back its debts. Liquidation is a formal process to resolve financial matters before the company is formally dissolved.

However, if the company is dissolved, creditors can only pursue unpaid debts through the directors and shareholders of the company, as the company no longer legally exists on the Companies Register.

Consumer debt collection involves retrieving unpaid amounts from agreements between a company and an individual, covering rent, bills, contractor fees, or personal loans.

In contrast, commercial debt collection addresses unpaid invoices between two businesses, often tied to contractual disputes or non-payment for goods or services.

Commercial debt collection requires a profound understanding of legal proceedings and business contracts, emphasising the importance of maintaining positive commercial relationships.

Redwood Collections adheres to regulatory frameworks set by the Financial Conduct Authority and the Credit Services Association for both consumer and commercial debt collections, ensuring compliance with legal and ethical standards in debt handling.

When deciding the most suitable debt collection service for your needs, it's important to explore the different features within each of our service packages.

Our range includes the classic Collections service, designed for handling rare, one-off debts.

If you require regular assistance, the Collections Premier package is tailored to meet those needs.

For more personalised services, our Collections+ package offers a bespoke approach.

Additionally, we provide specialised debt management services for the education sector through our Independent Schools service package. With these diverse options, you can trust that we’ll have a solution to address the unique requirements of every situation.

Find out more about our range of services in our blog: https://www.redwoodcollections.com/blog/which-debt-collection-service-is-right-for-you

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