1. How can I protect myself from exposure to debt?
Always put any agreements in writing. That way it is easy to evidence the obligations of each party and to protect your position as creditor. At the outset of any agreement, obtain as much information as you can about the other party, particularly as regards who you are actually contracting with e.g. is it an individual or a company. It is vital to get it right. These details can be invaluable in the event that there are problems further down the line. Set clear timescales for payment of invoices and ensure that these are adhered to. In the event that they are not, issue a reminder or take further action as soon as possible. If you reach a point where you are in the position of advising a debtor that legal action is being commenced, be sure that you follow through with this otherwise the message will become meaningless. Where debt is continuing to accrue periodically it is important to set a financial limit at which stage legal action will commence. If payments are made, be sure to allocate these to the oldest debt to limit the possibility of your debt prescribing.
2. Is it financially worth my while to pursue debtors?
The effective recovery of outstanding debt is fundamentally important to all organisations in the current economic climate. It plays a crucial role in an efficient credit control strategy and can often mean the difference between business success and failure.
Recovery of a debt can never be guaranteed, however this can be managed by considering the circumstances of each debtor. At each stage of the recovery process, it is possible for you to assess the costs to date and determine whether it is financially worthwhile to proceed to the next stage. Even if the full sum is not immediately paid, a debtor will often put forward an instalment payment proposal that can then be carefully monitored.
3. What if I no longer know where my debtor is?
All is not lost. It is possible to instruct an investigator to carry out a trace search to track down a debtor. If your debtor can still not be traced, there are options within the court procedure to serve papers and commence actions where the whereabouts of a debtor are unknown.
4. How much does a court action cost?
The initial stages of debt recovery tend to be fixed fee and therefore easy to budget for. Legal actions can become expensive, but only where a debtor defends the case against them. Expenses are usually awarded in favour of the successful party, which can be off set against any outlays incurred.
5. What happens if I obtain a court order for payment and it is still not paid?
If you have successfully obtained a court decree, sheriff officers will then serve the charge for payment and debt advice and information package on the debtor. Thereafter, following expiry of the 14 day charge period, you are entitled to proceed with further enforcement action, such as arrestment, attachment or inhibition. It would also be open to you to raise a petition for sequestration of an individual, or to commence liquidation proceedings if the debtor is a company.
All possibilities and all avenues should be followed, in order to adopt the most appropriate approach available to a specific creditor. With careful consideration and directed advice, recovery can often be made where in other circumstances recovery opportunities might be missed.
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