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Busted – Top 5 Debt Recovery Myths

business debt recovery advice

Debt Recovery is the process of making individuals and businesses pay debts which are overdue, or which are disputed. What can and cannot be done in respect of collecting debts is often misunderstood by both debtors and creditors. Francesca Damario from the Debt Recovery team at Cognitive Law busts some of the most common Debt Recovery myths.

1 You can “put a winding up order” on someone

The insolvency process of winding up a company should be reserved only for the “can’t pay” clients, not applied against the “won’t pay” clients; and it is not appropriate if there is a dispute. The process is a little more prolonged than just “putting a winding up order” on a company, and usually has to be started by service of a Statutory Demand which if unpaid may give you grounds to issue a winding up petition. Only once a petition has been served and advertised can it go before the court and a winding up order applied for. It is neither a quick nor cheap fix to debt recovery.

2 A claim form must be personally served

This may once have been true, but no longer. A company can be served by post at its registered office or head office. An individual can be served by post at their last known address. Since the advent of social media there are many more ways to bring a claim to the defendant’s attention but take care as court permission may be needed first.

3 A person is only liable to pay their “share” of a jointly and severally liable debt

It is understandable to assume that if a debt is owed jointly by two or more people it can be equally shared amongst the business partners. However all parties are liable for the whole debt until it is paid in full – not just their share. The creditor is not concerned about the arrangements the debtors have between them to pay the debt.

4 A creditor must accept any offer of repayment made

A debtor may claim that as they cannot afford to repay the full debt, a court will be order them to pay less than the amount they owe to the creditor. Whilst a debtor can file paperwork at Court advising of their poor financial situation, it will not affect whether they are liable or not. Unless you want to make a commercial decision to take a lesser sum early, you do not have to accept low offers.

5  All contracts or agreements have to be in writing

You may think the absence of a contract or signed agreement is a get out of jail free card, but not having a written document does not negate the debt. A written document could of course make the debt collection a little easier; however, there are only limited circumstances where there is a formal legal requirement for there to be a written contract to render it enforceable.

If you require assistance in collecting unpaid debts please contact a member of our Debt Recovery team on 0333 400 4499.

Francesca Damario