To protect your cash flow, you need to ensure that your business can collect bad debt. This is a common area of business activity and there is a well-established legal process for debt collection for businesses.

The Process of Recovery of Bad Debt

  1. Letter of demand is sent to the debtor. This debt collection letter needs to be legally admissible and so must include: specific details of the debt, a request that payment be made by a certain date; and a warning that debt recovery options will be pursued if payment is not received by this date.
  2. Suing for debt. Court proceedings commence with the filing of a claim form and particulars of claim. The Court handling the matter depends on the amount of the debt and the forms required vary so it’s important to seek legal advice at this stage.
  3. The way that the debtor responds to the claim determines the next steps. They may admit the debt and agree to payment of the debt in installments or they may not respond at all in which case a Court Judgment will be obtained or they may file a Defence.

Court Judgments

The Court has a range of options available to proceed with collection of your money. These include:

  • Seizing property, where the debtors’ goods are seized and sold at auction
  • Selling Real Estate
  • Summons, where the debtor has to attend a public Court examination to explain their assets and liabilities
  • Garnishee Order, where a percentage of their wages are given to you
  • Bankruptcy/winding up proceedings

How we can help

We can help you at any stage of this process of recovering a business debt, whether it is helping you write an effective and legally sound letter of demand or pursuing the matter through the court system. We are familiar with the process of enforcing judgments and can manage the process right through to bankruptcy or company winding up proceedings if need be.

We are also well aware of the costs of debt litigation and can advise you on whether it is commercially viable to proceed to Court.

Never letting it happen again

One way to protect against bad debt is to review your contracts, trade agreements and terms of business. We can help you make sure that your terms are clear and your processes solid, so you can avoid lengthy and costly litigation proceedings in the future.

Contact us to arrange a consultation.