Debt Recovery in the Current Climate

A consequence of the current economic climate is a significant increase in the level and number of debts due to service and goods providers and the concomitant increase in the number of “bad debts”. High levels of uncollected debts can have a devastating effect on your business and it is important to have an effective, efficient system in place for recovery of these debts to relieve cash flow and associated  difficulties which may otherwise arise. 

Many businesses are reluctant to engage the services of a Solicitor to recover debts -the perception is that these services are costly and time consuming. However, experience has taught us that the sooner we are instructed, the more likely the prospect of recovery.Prompt and effective action can be the difference between a bad debt and a fully paid account.If your solicitor adopts a proactive approach to the debt recovery process, good results can be achieved with minimum expense.

If you are concerned about the expense and procedures involved, discuss these concerns with your solicitor, get an estimate of the costs involved, how much will be recoverable from the debtor and an outline of the legal process.He will be glad to give you this information – informative, two-way communication is the key to an effective action.

What information will your solicitor require:

1. The name of the customer – is the customer a sole trader, partnership or limited company?

2. Copy invoices

3. Details of the contract

4. Notes of any telephone calls and meetings regarding the contract, payment and requests for payment

5. Copies of any correspondence with the customer

6. Any details you may have regarding the customer’s financial situation

Your solicitor will write to the customer advising that legal proceedings will be issued if payment is not received within 7 days.This letter should also notify the customer that he will be liable for legal costs if proceedings are issued. Our experience has taught us that the greatest yield in Debt Collection matters occurs pre-judgment and therefore, it is vital that cases are dealt with speedily and efficiently by your legal representative.

Once Judgment has been obtained, the following options are available to you if the debt and costs of legal proceedings remain unpaid:

1. Referral of the judgment to the Sheriff for collection

2. Application to the District Court for an Instalment Order for payment of the amount due by monthly instalments

3. Publication of the judgment in the various trade gazettes

4. Registration of judgment as a Mortgage on the Debtor’s property – if the property is sold or transferred, your judgment will be paid when prior charges have been discharged

5. Bankruptcy proceedings

6. Application to the High Court for an order for the winding up of a company

It is important to consider all circumstances of the case at this stage – your solicitor should be in a position to give you appropriate and directional advice regarding the cost effectiveness of further proceedings and the likelihood of recovery.

In the current economic climate traditional methods of enforcement are not always appropriate or effective and alternative methods of resolution should be considered. Your solicitor may engage with the debtor to establish his  financial situation by completion of a Statement of Means form and negotiate an instalment repayment plan.  This type of negotiation can result in timely payment of debts and effective resolution of cases

What are the advantages of solicitor action?

1. Legal proceedings are an additional “threat” which you can use when other collection methods have not yielded results

2. Proceedings are issued and served formally on the debtor – this involves your customer in a formal legal process, emphasising the gravity of the situation

3. Additional costs of legal proceedings are notified to the debtor – this can be a strong incentive to pay before proceedings go further

4. Most debtors respond to service of proceedings, whether it is to pay, or to negotiate an instalment payment plan or to outline his financial difficulties

5. Customers will take threats of legal action seriously

6. Proceedings are necessary for certain types of injunctive relief, for example if the debt is substantial and the debtor is disposing of property or assets, an injunction to prevent the debtor from disposing of his assets can be sought

7. If your customer is selling property and you have a judgement registered as a mortage on the property, your judgment must be dealt with (ranking in priority with other cjangs) on disposal of the property

 

A focussed and effective attitude towards recovery of debts is particularly necessary in these difficult times.If you are experiencing difficulty we suggest that you take action as soon as possible and hopefully, this will assist you in the continued success of your business.

What should you do if you are experiencing difficulty with collection of debts:

• Diary invoice payment dates and send out regular and timely reminders

• Do you think the customer is experiencing financial difficulties?  Perhaps you have heard something to this effect?  If so, consult your solicitor immediately

• Telephone the customer to request payment by a specified date

• Review the account on that date - perhaps the customer is a “slow payer” who will pay?  Maybe the invoice is very small in view of the customer’s business with you?

• If you have concerns about payment and decide to pursue the matter, write to the customer advising of your intention to issue legal proceedings for on a certain date. Contact your solicitor to commence action on that date

Jacci Fox is the Debt Collection Manager in our Debt Collection Unit of Holmes O’Malley Sexton solicitors.She can be contacted at 061-445585 or by e-mail at jacci.fox@homs.ie

Holmes O’Malley Sexton solicitors will not accept any responsibility for loss or damage arising to any person as a result of acting or failing to act as a result of the information contained in this article.  Legal advice should always be sought before acting upon any matter covered in this article.

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