Commercial Debt Recovery

A creditor starts the process of debt recovery if a debtor has stopped repaying and there are outstanding dues. The same process is followed in both personal and commercial debt recovery.  

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The First Step

The creditor first issues a Letter before Action to the debtor. This notice provides detail of the outstanding dues. It requests the debtor to pay the dues within the specified period of time. In most cases, a 7-day time is given to the debtor. It is a mandatory first step in the debt collections process before the creditor can initiate any court proceeding.

The Second Step

The creditor starts the court proceeding against the debtor who has failed to respond to the first formal debt recovery letter. Most creditors first try to find the current financial strength of the debtor before initiating the court proceeding. Investigators are used to collect information on the property and other assets owned by the debtor. A claim with the help of a legal expert is prepared. It carries the approval and signature of the lender. The claim issued by the court is served on the defendant who has 14 days to respond. The debtor has 28 days if an Acknowledgment of Service has been filed. The court issues Judgment in Default if no response from the defendant is received within the specified time limit. In such a case, the judgment is issued without a trial.

The Third Step

If the defendant still refuses to make payment, the creditor starts the enforcement process to recover the dues after the judgment is received. Any previous investigation into the defendant's assets proves useful now. A county court bailiff issues a Warrant of Execution. The bailiff visits the defendant's premises to seek payment. If the payment is not made, goods worth the judgment value are seized. The payment now also includes the court free. In case the debt exceeds £600, the creditor gets a writ issued by the high court. This writ allows an enforcement officer to start the process of recovering the judgment debt. It may involve seizure of the goods belonging to the debtor. A charge may be placed on the defendant's property with the help of a Charging Order. If the debtor does not remortgage or sell the property, a sale order is issued by the court. If the debtor is employed, the county court can compel the employer of the debtor to deduct the earning to clear the debt. In another type of judgment, assets owned by the debtor and held by a third party like a bank are used to recover the debt. The last option is to declare the debtor bankrupt. The creditor may decide to write off the debt if it is no longer possible to recover any more money from the debtor.

There are strict laws that regulate the debt recovery process. Creditors are not allowed to recover their debt using illegal methods. There is a due process involved in it and the creditors have to follow it. Essential household items and certain other goods like the equipment on lease cannot be seized.