What We Do
As a general rule we can recover debts on your behalf from any sole trader, partnership or company which trades in Scotland. The rules on jurisdiction are complicated but if the contract for the provision of goods and services was performed in Scotland then you can sue in Scotland. Our debt recovery experts are based in Glasgow but our debt recovery services cover all of Scotland. If your debtor is based in England we can advise on recovery of English debts and instruct recovery in England on your behalf.
What types of debt can we recover
We are experienced in the recovery of debts arising from commercial contracts, building contracts, consumer contracts, and other miscellaneous agreements which result in a debt becoming due.
What can we recover
As well as the original debt due to you we can often recover a fixed administrative fee and statutory interest at 8% over base. If successful in your action we will also be able to request the court makes an award of expenses (costs) against the debtor. In other words our expertise may result in an increase on the sum you thought was recoverable.
What information do we need
Most debts arise from a contract where goods or services have been supplied but not paid for. Although many contracts are written, in Scotland this is unnecessary and often contracts arise informally. Most likely a failure to pay has arisen after an invoice has been ignored. In order to properly recover your debt we need to have sufficient information about the debt and the debtor including copy invoices requesting payment.
Often the invoice provides sufficient information to allow us to institute recovery. However if your case is defended we may need further information from you such as copy correspondence and e-mails.
How long will recovery take
Often debtors respond quickly to our demands for payment and a debt is settled by return or, with your agreement, in instalments. However if you raise an action, recovery will take longer. If a writ is served on the debtor but not defended by him then you will get decree in about one month. If the writ is defended then recovery may take a number of months.
How much will it Cost
We are the only firm of solicitors in Scotland (as far as we are aware) who offer a fixed cost commercial debt recovery service. This service means that your solicitor fees are fixed and agreed before we commence recovery on your behalf.
If I win will I recover my court costs
The general rule is that if your case is successful the court will award you expenses. Court expenses are fixed by Parliament and are not generous. A rule of thumb is that an award of court expenses will result recovery of 50 – 60% of your actual court expenses.
What other remedies are available to me
If the debt is admitted it may be open to you to have the company declared insolvent or an individual made bankrupt. In both cases we can provide insolvency and bankruptcy services should this be a more appropriate method of recovering what is due.
For further information please call Colette Kerr on 0141 332 0915 or 07740 986 393
Below are several case studies illustrating our approach to the debt recovery process:-
The Construction company
This company had enjoyed great success and had built up a large portfolio of clients. However during the good years of growth it had failed to diligently recover a large number of contract retention sums due to it. The retention sums varied from 1 – 5% of the contract cost and some dated back a number of years.
This company consulted us and we initiated our recovery process on their behalf. As some of the debts were aged we were able to charge interest at 13.5% on the outstanding sums. The addition of interest at this rate and the claimed administrative costs greatly increased the sum sued for and the pressure on the debtor to settle quickly. Within 7 weeks of commencing recovery procedure we had recovered over 90% of the building company’s bad debts, a sum of over £100,000.
The Sole Trader
This small firm approached us about a number of outstanding debts owed to it by a larger contractor. The recession had put our client in a difficult financial position and it required to recover as much cash as possible in order to continue to trade profitably and maintain employment.
The debtor had promised many times to settle the accounts but had consistently broken those promises. The debtor had stopped responding to telephone calls and correspondence which is a sign of possible insolvency.
We initiated recovery on behalf of our client. The client now has a decree for the full amount plus interest, administrative costs and court expenses. The debtor, realising that he will be bankrupt if he does not settle with our client, has raised finance from the bank to settle the debt.
The Professional Services Firm
This firm had a number of old debts owed by clients going back some time. They had been reluctant to press some of the clients for payment as they had ‘good’ relations with them. However as the debts had become more aged the clients’ urge to pay them had diminished. Some clients had stalled payment ostensibly on the promise of further work.
By putting the recovery process in our hands this firm were able to decouple from a recovery process which they found difficult.
We understand the problems some firms have in recovering debts. On the one hand continuing client relations requires careful management. On the other hand clients do understand that you cannot work for nothing and that they are obliged to pay for the goods and services you provide.
We were able to recover the debt on behalf of the client by taking the recovery process out of the client’s hands. In most cases the firm preserved the client relationship and the debt was repaid.
For further information please call John Carruthers on 0141 332 0915 or 07764 253 998
Recovering Interest on Debts
In an attempt to reduce the widespread practice of late debt repayment which causes many small businesses considerable liquidity difficulties, the Government passed The Late Payment of Commercial Debts (Interest) Act 1998 (“the Act”).
The Act provides a useful tool to recover a larger sum from the debtor than the client anticipated was due. The availability of interest running from an early date means the client’s recovery costs are underwritten to an extent and makes debt recovery litigation more attractive to creditors.
The Act allows all businesses to claim interest if another business or public authority is a slow or late payer. Interest generally becomes payable at 8% above the base rate, 30 days after the debt was due.
Where the service or goods have been supplied the interest becomes payable 30 days after the later of the following two events:
- where the goods or services have been delivered; or
- the day on which the supplier gave notice to the purchaser of the amount of the debt
In order to prove notice the supplier should invoice the purchaser in the normal way. Notice does not require to be in any special form indeed no mention need be made of the Act at all.
For further information contact our expert Scottish debt recovery solicitors today on 0141 332 0915.
Where a credit period has been agreed interest runs from the end of the credit period. Thus where there is a stipulation of 90 days credit the interest runs from the 91st day.
Interest is calculated as simple interest. The base rates are fixed for a six month period. The applicable rate applies to the debt and does not then vary with time. Simple interest means that it cannot be compounded. The current interest rate is 8.5%.
Example: £500 is owed. The purchaser pays 18 months late after the 30 day period has expired. The base rate is 6% and 8% is added to this. Interest is therefore 14% on £500 which equates to £70 per year. The debt is 18 months late therefore interest due is £105.
Interest can also be calculated on a daily basis. Thus a £500 debt increases by £0.19 per day. (£500 *14% = £70, then £70/365 = £0.19).
The simplest way to recover statutory interest is to seek payment of the debt with interest running at the set rate from the date the interest was due.
In addition to claiming interest on a debt you can recover a fixed sum to compensate for the cost of recovering the debt. Where the debt is up to £999.99 then an administrative fee of £40 is due. Debts of between £1,000 – £9,999.99 result in an administrative fee of £70 being recoverable. A fixed sum of £100 is due where the debt is £10,000 or more.
You can contract out of the Act. Many contracts make provision for late payment. If a contract has such a provision the interest rate must be substantial otherwise the Court will rule that the clause does not apply and that the Act does. Anti-avoidance measures are unlikely therefore to work.
The Act applies where the contract is governed by the law of the United Kingdom or its constituent parts. Some contracts stipulate that the contract is governed by the law of England and Wales or Scotland. If this is the case the Act applies.
Normally where the contract has a substantial connection with the UK or where payment is to be made in the UK that would mean that the Act applied.
For further information on our Debt Recovery services please call John Carruthers on 0141 332 0915 or 07764 253 998
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