Show Me The Money: Recovering Debt from Individuals
When an individual owes you money, there are steps you can take to encourage the debtor to pay up and avoid the time and money that goes into legal proceedings.
- Get in Touch
The first step is often the most uncomfortable, but the most necessary. Send the debtor a calm and collected email reminding them of their outstanding debt with the invoice attached. Inform them that you reserve the right to pursue all available legal remedies if payment is not received by a specific date.
Emailing will not guarantee success, but in some cases, it resolves the conflict without much worry.
If they do not respond to the email after you have sent it several times, give them a call. Even if they do not answer, you know what your next steps are going to have to be.
2. Send a Letter of Demand
A Letter of Demand is a formal written notice that requests immediate payment of the outstanding debt. You can send this yourself, or arrange for a solicitor to do so. It should outline the invoice showing the total debt owed, confirmation that the goods or services subject of the debt were provided, a final deadline for payment and a description of what action you will take if the debt is not paid.
3. Consider a Settlement
If the debtor either disputes the demand and refuses to pay, or claims that they cannot pay in full, your next step may be a commercial settlement. A settlement is a legally binding agreement where both parties agree to resolve the debt through either a reduced lump sum payment or a structured payment plan over a defined period. Any settlement agreement should be documented in writing and signed by both parties.
If you believe that the debtor’s claims are not valid, you can bring the matter to court. However, many choose a settlement as the safer and less taxing option.
4. Go to Court
Court should always be a last resort. However, in some cases, it is the only way for you to get the best outcome. If you choose to commence legal proceedings, the outcome will be any of the following:
- The debtor does not file a defence and also does not pay their debts. The court will then grant a default judgement ordering them to pay.
- The debtor files a defence and the court deems it to be valid and you are unsuccessful. You may also have to pay the legal costs of the other party.
- The debtor files a defence that fails and the court makes a judgement debt, an order about how much is owed which includes the original debt and your legal fees. Hooray!
5. Enforce the Court Judgement
Once you have a judgement debt, you can take steps to enforce that judgement so the debtor has to pay the money that they owe. Enforcement options may include: (1) obtaining a writ of execution against the debtor’s property, (2) seeing a garnishee order against the debtor’s salary or bank account or (3) for debts meeting the statutory minimum threshold initiating bankruptcy proceedings.
Unfortunately, enforcing a judgement will cost your further time and money, and there is no guarantee that you will get paid. Any judgement debt will be on the debtor’s credit rating which can impact their ability to borrow money and, in turn, affect any business they operate.
Unpaid debts are an unwelcome surprise, and even after pursuing legal action there is no guarantee that you will get paid. However, if you follow appropriate legal processes, you give yourself the best opportunity
If you have any questions regarding unpaid debt collection, please do not hesitate to contact me. I am here to help.
DISCLAIMER: This article is for informational purposes only and does not constitute legal advice.