Most unpaid debts are never decided by a judge. They get paid because someone asked clearly, put it in writing and made it plain what would happen next. Court is there if you need it, but the steps before it are where most money is recovered.
This guide is for businesses, sole traders and individuals in England and Wales who are owed money under a contract, an invoice or a loan. It covers the general process. Your own situation may need specific advice.
Get your paperwork in order first
Before you chase anyone, be sure of what you are owed and why. Gather:
- the contract, quote, order or terms that set out what was agreed
- the invoices, with the date each one fell due
- any record of payments already made
- emails, messages or letters where the debt was discussed, especially any that admit it is owed
Check who you contracted with. An invoice addressed to a director personally is different from one addressed to their limited company. If the customer is a company, look it up on Companies House to confirm its registered name and address and to see whether it is still trading.
Check the date too. You generally have six years from the date a contract debt fell due to bring a claim, but older debts are harder to recover.
Start with a clear reminder
Many late payments are an invoice sitting in the wrong inbox, and a polite reminder with a copy often solves it. A phone call can help, but follow it with an email so there is a record of what was said.
If the reminder is ignored, send a short statement of account showing every unpaid invoice and the total. Ask for payment by a specific date. Keep the tone factual. Anything you write may later be read by a judge, and calm letters age better than angry ones.
Add interest where you are entitled to it
If you are a business owed money by another business, the Late Payment of Commercial Debts (Interest) Act 1998 usually lets you claim interest at 8% above the Bank of England base rate, plus a fixed compensation sum for each late invoice. Your contract may set its own rate instead. Mentioning this in writing often speeds things up.
Debts owed by consumers work differently. You can only add interest if the contract allows it, although a court can award interest if you later issue a claim.
Send a letter before action
If reminders have not worked, the next step is a formal letter before action. This is the last letter before a claim is issued, and the court expects you to send one.
The rules depend on who owes you money.
- If the debtor is an individual or a sole trader, the court’s protocol for debt claims applies. The letter must set out the amount, how it is made up and whether interest or charges are being added. It must enclose an information sheet, a reply form and a financial statement form, and it must give the debtor 30 days to respond.
- If the debtor is a company, the general rules on conduct before a claim apply. The letter should set out the claim clearly and give a reasonable time to reply, commonly 14 days.
A good letter before action attaches the key documents and says a court claim will follow if the debt is not paid or disputed by the deadline. It should not threaten anything you are not prepared to do.
Getting this letter wrong has consequences. If you issue a claim without following the right steps, the court can pause the case or reduce the costs you recover even if you win.
Be open to a payment plan
A debtor who replies to say they cannot pay in one go is still a debtor who has replied. A realistic payment plan is often better than a court judgment you then have to enforce.
If you agree one, put it in writing. Set out the instalments and the dates, and say what happens if a payment is missed, usually that the whole balance becomes due at once. Keep a record of every payment received.
If the debtor disputes the amount, take the dispute seriously. Mediation or a short without prejudice discussion can settle a disagreement over part of a bill far more cheaply than a hearing.
If none of this works
If the deadline in your letter passes with no payment and no proper reply, you can issue a claim in the county court. For straightforward claims for a fixed sum, this can be done online through Money Claim Online. If the debtor does not respond, you can ask for judgment without a hearing. If a judgment then goes unpaid, there are enforcement options, including enforcement agents, an attachment of earnings order and a charging order over property.
Before you issue, think about whether the debtor can actually pay. A judgment against a company that has stopped trading may be worth very little.
If you are owed money and your reminders have gone unanswered, call us on 0161 496 0123 or send us your invoices and the emails with your customer. We will tell you whether a letter before action is likely to work and what it would cost to send one.
Need advice on this? See how our civil litigation team can help, or book a consultation.