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When you instruct a debt recovery specialist to collect a debt, the debt recovery specialist will write to your debtor and tell the debtor that unless the debt is paid within a stated number of days, Court proceedings will be commenced.
The letter will identify the creditor and the debtor and explain how much the debtor owes, usually by identifying invoices or a contract.
It will give a date by which the amount due must be paid, it may say when this amount should have been paid and it will provide a simple and obvious method for transmitting payment; for example, by cheque, postal order, direct debit or standing order. It will also indicate whether this sum should be paid to the solicitor or to the creditor and will provide a telephone number and an address to which queries or reasons for non-payment can be directed.
The letter will explain that if the payment demanded is not made within the stated number of days, then Court proceedings will be commenced by the creditor against the debtor and that if Court proceedings are commenced, then in addition to seeking payment of the original debt, the debtor will also seek payment of costs and interest.
Many of your debtors will have previous experience of debt recovery procedures. They will know that when a creditor has exhausted the creditor's internal procedures and has referred a debt to a debt recovery specialist for collection, the first thing the debt recovery specialist will do is to send a letter demanding payment. If the debtor can avoid paying the amount owed until that time, then the debtor will have succeeded in obtaining an inexpensive line of credit until then. For this reason, it comes as no surprise to us, that we collect approximately one-half of all of the debts we are asked to collect by simply sending a letter before action.
If the debtor fails to respond to the letter before action, then the next stage in the debt recovery process is to commence Court proceedings. If Court proceedings are commenced then the cost of those Court proceedings may be recovered from the debtor, if the debtor pays the debt in full, but otherwise will have to be paid by the creditor. If the debtor is not given sufficient notice of the creditor's intention to commence Court proceedings, then the costs of the Court proceedings may be irrecoverable. The letter before action ensures that the debtor is given sufficient notice of the Court proceedings.
If the debtor has a valid reason for not paying the debt, then it is better to find this out as early as possible when minimal costs have been incurred, rather than later in the process when costs are higher. The letter before action may flush out a dispute, or at least establish a dialogue with a debtor.
If a dialogue can be established with a debtor. Then this may enable the debt recovery specialist, through negotiation, to agree with the debtor that the debtor will pay the debt by instalments and may also allow the creditor's debt recovery specialist to find out more information about the debtor's assets and liabilities and therefore help the debt recovery specialist determine which enforcement method may be used to enforce any judgment the creditor obtains against the debtor.
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