When dealing with unpaid invoices, it’s natural to consider legal action as a way to enforce payment, but this isn’t the only option!

Legal Action to recover unpaid invoices

Court Action

• Small Claims Court: For debts up to £10,000, you can use the Small Claims Court. It is a relatively low-cost option with a straightforward process. Upfront fees can range between £35 and £455.
• County Court Claim: For larger debts, you can make a County Court claim. This process is more formal and can lead to a County Court Judgment (CCJ) against the debtor. Upfront fees can range between 5% of the claim and £10,000
• High Court Action: For very large debts (over £100,000), you can escalate the case to the High Court. Upfront fees can range between 5% of the claim and £10,000

Downsides of Court Action

• Cost

> Court Fees: Initiating court proceedings requires upfront costs and paying court fees, which can be significant depending on the amount being claimed. These fees may not be fully recoverable if the debtor cannot pay.

> Legal Costs: If you hire a solicitor, legal fees can quickly add up, particularly in complex cases on top of the court fees. While you may be able to recover some of these costs from the debtor if you win, this is not guaranteed.

• Lengthy process

> Court proceedings can be lengthy, often taking months or even years to resolve, especially if the case is disputed and goes to a full trial.

> If the debtor is insolvent or enters insolvency proceedings during or after the court case, even a favourable judgment might result in you receiving little to no payment. Time is of the essence when looking to recover an unpaid invoice!

• Uncertain outcome

> Even if you win the case, there’s no guarantee that the debtor will pay the judgment. You may need to take further enforcement action, which involves additional time and costs.

> The debtor might defend the claim, leading to a protracted legal battle.

Letter Before Action (LBA)

> A solicitor can send a Letter Before Action, which is a formal letter demanding payment within a specified period, typically 7 or 14 days. It warns the debtor that failure to pay will result in legal action.

Downsides of Sending a Letter Before Action (LBA)

• Cost

> While drafting an LBA is less costly than full court proceedings, involving a solicitor to draft the letter can still incur costs. This can add to your overall expenses, especially if the debtor does not respond positively.

• Lack of response

> The debtor may ignore the LBA, forcing you to proceed with court action or other recovery methods. In this case, the time and money spent on the LBA would be wasted.

> If the debtor does not have the funds to pay, an LBA may be ineffective, leaving you in the same position as before but with added frustration.

• Limited leverage

> If the debtor knows you may not follow through with court action, they might call your bluff and continue to delay payment. An LBA alone might not be enough to compel payment without the genuine threat of further action.

Pre-litigation option to recover unpaid invoices: No win-no fee debt recovery

A no-win, no-fee pre-litigation service offers a proactive and cost-effective alternative to legal action. These services are designed to recover unpaid debts without involving the courts.

Skilled professionals work on your behalf to negotiate with the debtor and recover the money owed to you. Because the service operates on a no-win, no-fee basis, you only pay if the recovery is successful, making it a low-risk option.

This approach often achieves quicker results, as debtors are more likely to settle when faced with professional recovery efforts. Moreover, it helps maintain a positive business relationship, as it avoids the adversarial nature of legal disputes.

No upfront fees.

Which option gives better and faster results?

• For speed and lower upfront costs, a “no win, no fee” debt collection agency is generally the better option.  It is likely to provide faster results compared to court action. They can often apply pressure more effectively and persistently than a single LBA.
• For legal enforcement, especially in disputed cases, court action is more appropriate, albeit slower and costlier.
• An LBA is a good initial step but may need to be followed by one of the other options if the debtor doesn’t respond.

Darcey Quigley & Co can help you with your B2B pre-litigation debt recovery needs!

Darcey Quigley has a 93% success rate in recovering unpaid invoices and an 86% success rate in also recovering late payment fees. Meaning in many cases, clients will receive free debt recovery!

UK or International debts, the team can help you – book a call with their team of specialists today. https://calendly.com/commercial-debt-specialist/30min