To protect your cash flow you need to ensure that you or your business can collect bad debt. This is a common area of business activity and there is a well-established legal process for debt collection and, in certain circumstances, the costs of recovery. The usual process is as follows:
- A letter of demand is sent to the debtor. This letter needs to be legally admissible and so must include specific details of the debt, a request that payment be made by a certain date and a warning that debt recovery options will be pursued if payment is not received by that date.
- If payment is not received or acceptable arrangements for payment are not made, Court proceedings are commenced with the filing of a Statement of Claim. The Court handling the matter depends on the amount of the debt and the forms required vary, so it’s important to seek legal advice at this stage.
- The way that the debtor responds to the Statement of Claim determines the next steps. They may agree to an installment order, they may not respond at all in which case default judgment will be obtained or they may file a Defence.
- If you are successful in obtaining judgment, there are a range of options available to proceed with collection of your money. These include a writ to seize the debtor’s goods or property to sell at auction, garnishee order to receive a percentage of the debtor’s wages directly from their employer and bankruptcy or winding up proceedings.
We are experienced with the legal processes involved in debt recovery services. We can help you at any stage of this process, whether it is helping you write an effective and legally based letter of demand or pursuing the matter through the Court system. When it comes to enforcement of a judgment, we can readily manage the process right through to individual bankruptcy or company winding up proceedings if required. We are also very familiar with the costs of debt litigation and can advise you on whether it is commercially viable to proceed to Court.
At the end of the day, prevention is better than a cure. One way to protect yourself against bad debt is to review your contracts, trade agreements and terms of trade. We can help you make sure that your terms are clear and your processes solid so you can avoid lengthy and costly litigation in the future.