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New rules for debt recovery

Stacy Jackson from the Commercial Litigation Team at Wilson Browne Solicitors advises on the new Debt Recovery Protocol.

THE new protocol came into force on the 1 October 2017 and could potentially have a big impact on your business if you have outstanding debts due from individuals. It does not apply to business-to-business debts unless the debtor is a sole trader, or if the matter is covered by another pre-action protocol such as construction and engineering or mortgage arrears.

What does the new protocol hope to achieve?

The court is trying to encourage early engagement and communication between the parties, and to enable the parties to resolve the matter without the need to start court proceedings: this includes agreeing a reasonable repayment plan, or considering a method of Alternative Dispute Resolution (ADR).

Distinct changes

One of the major changes of this new protocol is that the creditor will have to provide the debtor with 30 days to respond. The Letter Before Action, now called Letter of Claim should include (but is not limited to) the amount of the debt, the amount of interest or other charges accruing, and details of how the debt can be paid.

In addition to the Letter of Claim, a current statement of account, an information sheet, reply form, and a financial statement form, should be included. If the debtor does not reply to the Letter before Claim within 30 days, you are entitled to commence court proceedings.

Responding

The debtor should use the reply form and is entitled to request copies of the documents it considers relevant. If the debtor indicates that it is seeking debt advice, you have to allow them a reasonable period to obtain advice. If they need time to pay, you must try and reach an agreement such as instalments. If you do not agree to a proposal for repayment, you must say why, in writing.

If the debtor fails to fully complete a reply form the onus is on you as the creditor to contact them to discuss the situation and understand their circumstances.

If the debt is disputed there are further obligations that you must comply with and if an agreement cannot be reached, the creditor should give the debtor a minimum of 14 days notice of its intention to commence Court proceedings.

What does all this mean for you?

In general terms….more information and documentation must be provided in specific formats. There is also increased scope for delay in collection by debtors who can delay payment by up to 90 days.

How can we help?

Instructing us is easy – all we need is the unpaid invoice (which you can email, fax, post or drop in to us). Next, we’ll send a letter that complies with the protocol, let you know when it’s gone, and when you can issue proceedings if you don’t get settlement… all for a low, fixed fee.

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