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Debt Recovery Guide for Freelancers, Consultants and Sole Traders

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Posted in: Dispute resolution
Date published: 04/04/2022

Having a clear payment process, well-drafted contracts, and prompt invoicing is an important part of running a business, but what can you do when your clients simply won’t pay? Unpaid invoices can have a significant impact on the cash flow of your business and can prevent you from growing. Some payment issues can be so severe that they may even threaten to put you out of business or cause you to suffer personal financial difficulty. This article looks at some legal options available to sole traders, consultants, and freelancers when facing unpaid invoices.

Taking legal action against a client is a difficult decision to make. Late payment may be causing you significant worry and financial difficulty, but you don’t want to damage the working relationship with your client. However, you deserve to be paid for the work or the products or services you have provided. You should not be dissuaded from taking further action when necessary. 

It is possible to recover late payments without going to court. For many non-paying clients, the threat of legal action is enough to prompt them into making payments or setting up a repayment agreement. However, it may be necessary to escalate the dispute and take formal legal action in certain circumstances. We can advise you on the best process for your circumstances.

What is the difference between using a law firm or using a debt collection agency?

There are many differences between using debt recovery solicitors and a debt collection agency, but fundamentally it comes down to the understanding of the law and the tools available. Only a team of debt recovery solicitors can initiate court proceedings. Debt recovery agencies are limited in their actions unless you already have a court judgment in your favour or a Statutory Demand. Even from the outset, the prospect of action from a solicitor is more of an incentive for the client to pay, whereas debt collection agencies can only request that payment be made. In addition, our dispute resolution solicitors have an inherent understanding of your legal position and can set out your claim for payment clearly.

If you have decided to take legal action against a client for late payment of a debt, the first thing we would advise is to contact an experienced solicitor.

Depending on the value of your claim, your solicitor will advise you as to which court you must bring proceedings in. In England and Wales, the courts have different financial limits, so which court you must use will often depend on the value of your claim.

What is a Statutory Demand?

A Statutory Demand is a formal demand for payment of an undisputed debt. A Statutory Demand sets out that if the debtor does not make a payment or come to another suitable arrangement with you, you will begin formal legal proceedings against them.

Serving a Statutory Demand is a common action taken where a debtor owes more than £5,000 and the creditor plans to submit a bankruptcy petition against them. If the demand is not paid within 21 days, the creditor can petition to make the debtor bankrupt – there is, however, no obligation to do so.

If payment has not been made or a suitable arrangement is not in place after you have exhausted all other debt recovery methods, your team will take steps to begin legal proceedings. After we have submitted your claim to the relevant court, the debtor has 14 days to respond. They may:

  • Acknowledge the debt (which gives them 14 additional days)
  • Admit the debt and offer repayment
  • Partially admit the debt and offer repayment
  • Choose to defend the debt or lodge a counterclaim

If the debtor does not respond within 14 days, we may be able to secure a judgement.

Contact IMD – Commercial Debt Collection Solicitors

​​At IMD Corporate, we provide personal and bespoke debt recovery services to our clients. Instead of simply sending out a standard demand for payment to your debtors, we approach each case individually and work with you to find the best strategy to recover the funds due. We meticulously and persistently execute our debt recovery strategy, always going the extra mile to achieve the desired outcome. Call us today on 0330 107 0106 to discuss your circumstances with our team.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Published by:

Marcin DurlakManaging Partner

Business Services – IMD Corporate

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