If someone or a company owes you money and they’re not paying up, there are legal ways to help you recover the debt. Your course of action will depend on how much money is owed and if you can prove that the debt exists.
In this article, we’ll look at the legal ways you can recover debts owed to you and how a solicitor may be able to help you do this.
Table of Contents
- How to recover debts owed to you
- What can you claim if you end up in small claims court for a debt dispute?
- When should I consider making someone bankrupt for owed debts?
- When can I seek to liquidate a company for outstanding debts?
- How can I recover money owed from bankruptcy or liquidation proceedings?
- How can recover debts from individuals or businesses in foreign countries?
- How can I prove someone owes me money?
- Can I involve the police if someone owes me money?
- What is the time limit for claiming money owed?
- How can Lawhive help you recover debts owed to you?
How to recover debts owed to you
Contact the debtor
When trying to get back money owed to you, start by directly contacting the person or company. Ideally, you can work out a repayment plan together and put the matter to bed.
If informal talks fail, consider sending a letter before action. This letter, whether you write it yourself or have a solicitor do it for you, should clearly say:
The exact amount owed.
Why the debt exists.
What you've done before to sort it out.
A deadline for payment, usually at least seven days.
What will happen if they don't pay.
Even though disputes about money can be emotional, it's best to stay calm and professional. Avoiding arguments is more likely to lead to a resolution that works for both sides.
In the end, no one wants to issue claims at County Court if they can help it. So, everyone should try to solve the problem early on. Stay calm, stick to the facts, and avoid arguments that could worsen things.
Speak to a solicitor
As mentioned, a solicitor can send a letter to the person who owes you money, warning them that legal action might be taken if they don’t pay. Often, this kind of letter drafted and sent by a lawyer can be very effective in getting results.
A lawyer is also a good ally in helping you recover debts as they can help you know where you stand and explore other options for action. In our experience, clients aren’t always sure about the strength of their case.
Your solicitor can clarify this and give you the confidence to move forward with full knowledge of all the options and potential outcomes.
If you're unsure whether a lawyer can help you recover money owed to you, contact our Legal Assessment Team for a free case evaluation they’ll assess your situation and tell you honestly if we believe a lawyer is necessary.
Use a statutory demand
A statutory demand is an official request for debt served by a creditor to a debtor.
You can use a statutory demand to request money owed to you from an individual or business. If they ignore the demand or can’t repay, you can take further action by applying to the court.
Consider mediation to resolve a money dispute
If informal talks don't work, consider mediation.
In mediation, a neutral person helps both sides find a solution. It's usually faster, cheaper, and less stressful than going to court. Getting a mediation appointment takes about 2 to 3 weeks while waiting for a court date can take up to 30 weeks.
You can opt for mediation with an independent mediator to resolve your money dispute. Or, if you make a claim, you’ll be offered free mediation if:
Everyone agrees to try it.
The claim is for £10,000 or less.
The goal of mediation is to reach a legally binding agreement. Anything discussed in mediation can't be used in court later on (without prejudice) and if mediation doesn't work, you can still go to court without delay.
Take legal action
If nothing else works, you might think about going to court. But before you do, talking to a money, tax, and debt solicitor is smart. They can explain the risks and costs involved.
There’s no minimum amount you can claim for, but one thing to consider is whether the other person can pay you back. If they can't, getting your money back might be tough. If the debt is less than a certain amount, seeking action through the court may cost you more than the debt itself.
Court cases can take a long time, and you might not win. It's important to remember this. And if you lose, you might have to pay the other person's costs plus your own. If you win, you might need help from the Enforcement of Judgments Office to get your money, which will cost more.
What can you claim if you end up in small claims court for a debt dispute?
When recovering debt, you can claim the full amount owed and any agreed-upon interest. If the case goes to small claims court, you might also claim:
Court fees
Some money for legal advice costs
Interest at 8% per year from when the debt should have been repaid.
However, it's up to the court to decide, and further enforcement might be needed, costing you more.
When should I consider making someone bankrupt for owed debts?
You can make someone bankrupt if they owe you £5,000 or more, whether they are an individual, a sole trader, or part of a partnership.
If a bankruptcy order is issued, the debtor’s assets and finances may be used to repay the debt. But there’s no guarantee that the proceeds will cover the full amount owed, nor the debt owed to you will be prioritised over debts owed to other creditors.
Making someone bankrupt is a serious business, and, depending on the circumstances, it can be a difficult decision, especially if the debtor is a relative or friend.
When can I seek to liquidate a company for outstanding debts?
You can have a company liquidated if you and other creditors are owed £750 or more. This is called applying to the court for a winding-up petition.
If your petition is successful, the company’s assets will be sold to settle its debts. However, much like bankruptcy, there’s no guarantee the proceeds of the sale of these assets will cover your debts in full, and other creditors' debts may be prioritised over yours.
How can I recover money owed from bankruptcy or liquidation proceedings?
To recover money owed to you from a bankrupt individual or a company being liquidated, you must register as a creditor. If there are funds available to settle debts, you may receive a portion.
How can recover debts from individuals or businesses in foreign countries?
If you need to recover debt from a person or business in another country, speak to a money, tax, and debt solicitor for further advice. Debt recovery overseas can be complicated, with different laws and jurisdictions to consider. Before taking any action, it's best to get the full picture and specialist legal advice.
How can I prove someone owes me money?
It’s best to have a signed agreement, like a personal loan agreement or contract when dealing with money.
These binding agreements should, at a minimum, include the owed amount and repayment terms.
However, if you find yourself in a situation where someone owes you money and there’s no formal agreement or contract in place, you may be able to prove they owe you money using evidence like:
Unpaid invoices
Written communication like emails, text messages, or letters
Bank records to show previous payments
Witness statements.
A recent court ruling in Canada declared a simple thumbs-up emoji could be legally recognised as valid in forming a contract. Therefore, you may still have a strong claim without a formal written agreement.
Can I involve the police if someone owes me money?
Typically, disputes over money are classed as civil disputes, and the police aren’t likely to get involved unless you have been robbed or threatened.
If this is the case, you should contact the police on 999 if you are in immediate danger or report any non-emergency criminal incidents by calling 101.
What is the time limit for claiming money owed?
You have six years from when the debt was due to claim it. However, before making a claim for money owed, you must send a statutory demand to the debtor, giving them 21 days to pay it back or dispute the debt.
How can Lawhive help you recover debts owed to you?
At Lawhive, our team of expert money, tax, and debt solicitors is ready to assist you in efficiently recovering debts owed to you. We handle everything from drafting and sending statutory demands to representing you in court if necessary.
For more information, contact us today for a free case evaluation. Our Legal Assessment Team will discuss your case with you, advise you on how our solicitors can assist, and provide a no-obligation free quote for our services.