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Debt Recovery: When to call in a solicitor

Small businesses often rely on their cash flow to keep their daily operations running, which is why unpaid debts owed to such businesses can threaten their ability to remain operational.

With smaller debts, it is sometimes worth writing them off rather than pursuing legal action, but even though it might seem cost-effective to do so, it can also set an unwelcome precedent for future clients and customers to refuse payment of smaller bills.

Of course, it's usually the larger debts that threaten the financial security of a business, so these debts are absolutely worth pursuing. The only real issue for debate here is exactly when is it a suitable time to call in a solicitor.

When is it appropriate to call in solicitors?

This varies according to each situation, but there are certain aspects which remain the same regardless of the different circumstances faced by different businesses. The payment must be overdue by a such a margin that the business owner suspects that the customer has little or no intention of ever actually paying.

A refusal to pay can happen in a variety of ways, from a complete lack of communication from the customer, to constant promises of payment that never happens.

Once reasonable attempts have been made by the business owner, or employee in charge of the debt recovery, to resolve the situation amicably without success, it is time to allow the professional debt recovery specialists to engage the customer.

Does hiring a solicitor mean going to court?

Just because you have hired a solicitor, it doesn’t mean the case is going to court. In fact, one of the main skills of a debt recovery solicitor is dispute resolution.  This means that the solicitor will attempt to resolve the situation – ie, convince the customer to pay up – without the need to go to court at all.

Often the threat of legal action is enough to convince most debtors to pay what they owe, even if only because they know that they are in the wrong and legal action will end up costing them more than the actual debt.

How does a solicitor make the debtor pay?

The business owner who has hired a solicitor to recover a debt should be open to negotiation when it comes to how the debt is repaid. It is likely that the customer is simply not able to pay the entire debt in one go. In such a case, it is far better to receive the debt in instalments over an agreed period of time, rather than pursuing the matter in court. A court of law has no more ability to make someone produce money they don’t have than the business owner or solicitor themselves.

A solicitor will ensure the instalments are reasonable and satisfactory to both sides, and will of course ensure the paying customer understands the legal consequences of failing to meet the payments. This much friendlier method of dispute resolution can even result in the continued relationship between client and customer, should the business be happy to continue with their custom.

If you are a small business owner currently attempting to recover an unpaid debt, then consider using the dispute resolution and other legal services of North Yorkshire Law Solicitors.

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to legal services of North Yorkshire Law Solicitors directly.

Published on 31st January 2018
(Last updated 21st March 2018)

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