Legal advice from David Jones, a specialist commercial paralegal at FDR Law in Palmyra Square, Warrington
Debt recovery – when to get legal advice
Q: I run a small business. One of my regular clients is very slow paying his bills and now owes me a considerable amount of money. This is badly affecting my cash flow. Is it worth getting legal advice and how much would it cost?
A: If your business is struggling to survive due to bad debt, I can fully appreciate you may be reluctant to deplete your limited funds further by paying for legal advice. However, getting an experienced debt recovery lawyer involved at an early stage will be much more cost effective than letting the debt continue unpaid.
A solicitor will normally charge an hourly rate or a small percentage of the debt (typically 10%) and costs will largely depend on the size and complexity of the debt.
Before instructing a solicitor I recommend you try to chase your client informally, perhaps by phone and if that doesn’t work, send a written reminder.
If you feel you’ve exhausted all informal approaches, the next step would be to consult an experienced debt recovery lawyer who can send a formal ‘letter before action‘ on your behalf. There is no guarantee this will work, but it does demonstrate you are serious about recovering this debt. A solicitor does not need to be involved throughout the whole process unless you wish it. You can reduce costs by only instructing them to send the initial ‘letter before action’ or, if that fails to work, prepare court papers.
With the higher court fees introduced this month, it is even more important to seek specialist advice on your chances of recovery, ensure all documents are completed correctly and deadlines met.
Whatever your debt problems, consulting an expert debt recovery lawyer can save you money in the long run. It may even rescue your business.