Is my debt worth pursuing through legal action?
Posted on 29th January 2020 at 14:27
We understand that legal action is an investment that should be considered carefully. There are occasions where alternative approaches may be more appropriate than litigation, such as mediation or even writing off the debt.
Here are a few factors to consider when deciding whether to invest in debt litigation or not.
The cost of pursuing the debt compared to the value of the debt
Does the value of the debt exceed the cost of making a claim? In many cases, sending a solicitor’s letter to the debtor is a cost-effective starting point. It often gets your debtor’s attention and shows that you are serious about pursuing the debt. However, if that doesn’t work, you should consider the costs of court proceedings and whether you have evidence to support your claim.
If the case reaches court, the debtor may be ordered to pay some of your legal fees including the court fee. If the matter is resolved out of court, you will need to reach an agreement with your debtor about who will cover legal costs.
There is also the cost of the time you spend on the debt, when you could be doing other work. Outsourcing debt litigation to a debt recovery solicitor will save you time and resources, freeing you and your staff to focus on day to day work.
Your Business Relationship
You may wish to be a little more cautious where a regular customer suddenly fails to pay an invoice. A legal response may do far more harm than good. Balance the future income you could lose against what may only be a temporary cashflow problem for your customer. It is usually worth mediation in these cases. However, legal action should never be off the table.
Are you likely to get your money back?
Even with clear evidence of a debt and a judgment in your favour, there will be some debtors who simply don’t have the funds to pay you what they owe. There are a few ways to enforce a judgment, but if the debtor has no funds and no property, you may run out of options. You can’t recover money that simply isn’t there. Bankruptcy is available as a last resort, but this is no guarantee that you will recover your money. There may be a queue of creditors waiting to recover money from a very small pot.
If you’re still unsure whether to pursue a debt, get in touch to book an appointment, where we can assess your claim and advise whether you have a viable case.
Tagged as: Debt Litigation
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