If a company or individual owes you money and the usual channels for requesting payment aren’t working, what should your next step be? To some extent, that will depend on the debtor.
The aim, of course, is always to recover your money, but the best approach is going to vary. Because not all debtors are alike.
Two Kinds of Debtors
There are broadly two kinds of debtors — those who can’t pay and those who won’t pay. Reasons for “won’t pay” can range from using your bank balance to fund their cashflow to having no intention of ever paying. It can even be because they’re simply too inefficient to manage their finances.
Alternatively, either an individual or a company may currently be too cash-strapped to have access to what they owe you. That doesn’t mean giving up on getting your money, but it needs a different approach and may take longer. But how do you know which is which?
The Information You Need
It’s vital to base your strategy on facts, not guesswork, which means researching the debtor. This is where a debt collecting agency will have legitimate means of gathering data that would be difficult for someone not in the industry.
Besides finding the debtor’s address and phone number, it’s useful to have contact details for their employer, if they’re an individual. This could provide a channel for arranging repayment of the debt.
Most importantly, though, you need to know their current financial condition. If they’re a limited company, their most recent accounts should be available, but the agency will also be able to access this information for sole traders or individuals.
What Can You Do?
If you identify your debtor as a “won’t pay”, you can seek a County Court Judgement against them. This will enable you to enforce payment, or else their assets can be seized by bailiffs to pay the debt.
If the debtor turns out to be a “can’t pay”, it’s unlikely that enforcing a CCJ will leave you any better off. However, that doesn’t mean you shouldn’t seek a CCJ. You have six years to enforce it, and you can wait until the debtor’s finances are in better shape.
Alternatively, taking action may induce them to come to a repayment arrangement, perhaps paying off monthly instalments. It might not recover your money straight away, but in some situations it could offer the best chance of getting it eventually.
If you want to know more about any of these issues, you’re very welcome to give me a call for a chat.
