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Debt recovery – practical considerations

Added by Berlad Graham
February 29, 2016

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There are various legal factors that a Claimant must consider before initiating court proceedings with view to recovering a financial debt.  Is there a binding contract? Was there an intention to create legal relations? Who is the Defendant? Can the case be proven? In addition to the legal factors, it would be prudent to consider practical matters as well as costs proportionality. In the process of obtaining judgment a Claimant is likely to incur legal costs and court fees. Therefore, it is essential to ensure that the money they invest in legal proceedings is actually worthwhile.

However, obtaining judgment against a Defendant is only the first hurdle and does not guarantee payment.  The second is enforcing the judgement debt.

Financial status of the third party

Judgment on paper would be of little benefit in the event that the Debtor did not have the means of repaying the debt. Accordingly, before initiating court proceedings, it would be wise to consider the Debtor’s financial position. Does the debtor have the financial means of repaying the debt? Or, alternatively does the Debtor have sufficient assets against which the judgement debt can be secured? If not, it may best to avoid throwing good money after bad.

Time and costs

Even if a judgment debtor is willing to pay a debt, if he is unable to pay the full sum due, the Court may order that the judgment is repaid in instalments. In one such example, on application by the Defendant, the Court agreed that the Defendant could pay a judgment debt in monthly instalments of £6.60.  Considering the sum owed, It would take over 50 years for the Debt to be discharged! Accordingly, a Claimant must consider whether it is commercially beneficial to invest the time and costs in legal proceedings.

Locating the Defendant

Enforcing a judgment debt would be near enough impossible if you cannot locate the Defendant.  Prior to proceedings, a Claimant can carry out an in-depth search on the Defendant using a tracing agent. This would be beneficial in determining whether the Defendant can be located and would highlight any difficulties at an early stage.

For further advice contact Noor Khan