If you have exhausted all attempts to recover a debt by begging, cajoling or sending threatening letters, these five debt recovery tips may help you to recover your cash.
The legal system provides a number of measures to enable you to try to recover a debt owed to you once it has fallen due. You will have heard terms such as statement of claim, statutory demands, winding up applications, writs, garnishees, bankruptcy notices and so on. Each of these primary debt recovery tools has its own pros and cons and chances of succeeding. Which is the best one for you will depend on the circumstances of your case.
Consider one specific example: you commence court proceedings to recover a debt against a company and during that process the company is placed into liquidation. This will dramatically reduce your chances of recovering your debt. If you are an unsecured creditor, you will be forced to line up with all the other creditors and accept whatever amounts are finally paid by way of a dividend. Usually this is zero!
Here are five measures which you can take to protect yourself:
An obvious precaution is to do a comprehensive credit check before you do business with any company. This is the most basic protection against future bad debts. It can help you decide what terms of trade to extend and whether you want to do business with the company at all.
Surprisingly, many companies omit this simple step.
A properly drafted clause in your terms of trade allows you to place a caveat over a company or the property of its directors if the company does not pay its debts.
Having a properly drafted retention of title clause on your invoices will enable you to recover the goods you supplied to the company if some of those goods were not paid for.
Without such a clause, those goods may well be sold and the proceeds used to pay all creditors.
You have the right to insist that the directors of the company give you personal guarantees as a condition of doing business with you.
This will mean that you have access to their assets if the company has none.
You have the option of taking security over an asset of the company by a charge or some other means of security.
This will enable you to seize the property which is the subject of the security, rather than waiting in the queue with the other (unsecured) creditors.
These and other mechanisms can make it easier for you to recover debts when they fall due.
Decisive pre-emptive action is by far your best bet when it comes to recovering the money that you have worked so hard to earn.