Wiping Away Debt

How To Recover A Debt From An Individual

Creditors are given various options to choose from, though fortunately, you can save yourself from protracted litigation as it is not necessarily needed. Most of the time, a letter prior to action given by a solicitor is sufficient for prompting repayment or convincing the debtor to at least negotiate on settlements.

Individuals can sometimes get quite concerned because of debt recovery procedures and this can be troublesome for businesses. Individual entrepreneurs such as sole traders a few cases, are given more regulatory and legal safeguards including credit protections and consumer as compared to companies.

At the minimum, carrying out legal actions against somebody will most probably lead to a Pre-Action Protocol regarding debt claims, which are laws that look over how businesses deal with these recovery claims. Hence, when taking action against debt recovery, consulting well-experienced legal specialists is absolutely pertinent.

A few of the major options businesses or individual entrepreneurs such as sole traders have to recover from debts include:

  • Pre-action cooperation
  • Claim money from country courts
  • Enforcement methods
  • The individual's bankruptcy

Pre-Action Cooperation

A legal claim is rarely ever the first choice. Regardless of costs, Courts want creditors to have exhausted all steps in solving the problem before resorting to legal action. Pre-Action Protocols and Conduct Practice Direction clarifies the basic approach needed by parties before beginning proceedings, such as:

  • Patiently understanding each other's situation
  • Deciding on a way ahead
  • Taking into consideration alternative methods of resolving disputes, like mediation
  • Reducing costs of dispute resolution

For cases where there are individual to business debts, including times when debtors or creditors are sole traders, the Practice Direction’s purpose is supported by Pre-Action protocols for claims regarding debts which lay down the action conduct, including:

  • Rules about the claim letter/pre-action letter that should be sent by creditors to debtors before beginning proceedings.
  • Detailed initial information that creditors should provide debtors with as well as detailed evidence of reasons why the debt rose.
  • Service rules
  • Response deadline for the debtor
  • Rules about document disclosure and information should be relevant
  • Taking an initiative to solve the matter, including Dispute Resolution rules.
  • Last steps need to be taken before proceedings begin, including compliance with Pre-Action Protocol.

Claim Money From Country Courts

If external negotiations do not work out, either because of settlement disagreement between the debtor and creditor or due to the lack of engagement from the debtor, the next option is applying to the court county for a money claim. Creditors will have to be cautious in their approach by carefully evaluating the advantages of taking action and if recovery is even possible compared to the cost, especially if the risk of the debtor disputing that claim is high.

Regardless, applying for CCJ (County Court Judgment) is a good motivator against highly evasive debtors, and settlement discussions with creditors can go on even after the issuing of a claim. The procedure for a money claim at the court county always begins with the claim form being prepared and issued for the creditor. However, from that point onwards, the process is highly dependent upon the circumstances and response of the debtor.

Enforcement Methods

A CCJ is not automatic confirmation of the creditor being repaid. Although it does give the creditor more options to carry out a judgment debt, such as:

  • Transferring judgment to High Court to enforcement officers for enforcement or ordering court bailiffs
  • Securing Charging Orders over the property of a debtor
  • Applying for Orders for Sale to enforce Charging Orders
  • Securing your Third Party Debt order so to block out assets of the debtor and permit the creditor’s direct recovery.

The Individual's Bankruptcy

When an individual is unable to repay debts, a good alternative is to edge them into bankruptcy. The purpose of bankruptcy is to have their assets liquidated and funds distributed amongst creditors. The ways to make an individual bankrupt are:

  • Checking if other creditors started their bankruptcy proceedings.
  • Issuing your statutory demand for requesting debt repayment within a given deadline.
  • Issuing your bankruptcy petition for starting the court procedure of bankrupting the debtor.
  • Handling defended bankruptcy activities in case the debtor opposes the petition.
  • Acquiring your bankruptcy order – if your bankruptcy petition does not get dismissed, an order will be issued by the court.
  • Providing the receiver with debt proof so that the creditor’s repayment claim is lodged.
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