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| If you are in debt, being pursued by a debt recovery agency can be very daunting. Many companies 'write off' bad debts by selling them at a low rate to third party collection agencies. These agencies will then use dedicated resources to locate you and recover the outstanding amount that is owed. A letter from a debt recovery agent often uses threats to illicit a response - such as sending in bailiffs to recover the money, county court judgments, penalties or legal action. in these cases it is important to know your rights as they cannot use some of these actions unless the debt is over a certain amount. The Citizens Advice Bureau and other similar agencies will be able to tell you where you stand before you hand over any money. It is often worth negotiating with the debt collector to agree a low monthly repayment plan. As they have bought the debt at a substantial discount from it's originator, they may also be willing to write off part of the debt if you can pay it immediately in full - for example an agency would typically take £1,000 for a debt of £1,600 if you are able to pay them that day - so if you have the full amount to hand, don't agree to pay it immediately until you see what discounts they may have to offer. However uncomfortable, it is advisable to deal with bad debts as soon as possible. Running from debt collectors will only make the situation worse, as interest is charged on the debts and any missed payments are listed on your credit history. Many companies offer help in dealing with debt - either through debt management programmes, consolidation loans or other methods. Take your time to investigate the help available and find the best solution for you. It is important to think about how your credit rating may be affected in case you want to apply for credit in the future. |
For small businesses, being owed money can cause serious damage to cashflow - when debts exceed assets the day-to-day running of the company can become severely inhibited. The best way to tackle debt is to try and avoid it in the first place - offering a discount with invoices is a good method to ensure that your clients pay up on time. By placing a small discount - between 1 and 5 % in return for prompt payment, customers are encouraged to pay on time. If this doesn't work, some companies use debt factoring to keep the cash flowing. This involves selling the invoices to a third party, who then process the invoices and allow you to draw loans against the money owed to your business. This is useful for any clients that you know will pay up eventually , but ultimately will cost your business money - although some companies actually use debt factoring as a means to reduce administration costs as the factoring company handle the whole process. Debt Recovery through the courts can be expensive and time consuming. The small claims court is a cheap and direct way of settling debts for up to £5,000 - after this you can take the fast track process (for debts up to £15,000) or the multi-track process (for debts above £15,000). It is advisable to get a solicitor for larger debts or you could also employ a debt recovery agent to act on your behalf - they will employ solicitors themselves and take legal action to recover the money in return for a fee. A credit agency could also take your debt on for you by agreeing to give you an agreed portion of the total amount. they will then take steps to recover the money by contacting the debtor directly. |
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