What is Debt Recovery?

Debt recovery is the process of collecting money owed to your business when normal payment terms have been exceeded. In the UK, there is a structured escalation path from informal reminders to court action.

The debt recovery escalation process:

Stage 1 — Informal chasing (1–30 days overdue): - Send a payment reminder email referencing the invoice - Follow up with a phone call - Send a second reminder with firmer wording - Clearly state the due date and total owed

Stage 2 — Formal demand (30–60 days overdue): - Send a Letter Before Action (LBA) — a formal letter stating you will take legal action if payment is not received within 14 days - Mention your right to statutory interest and compensation - Keep records of all correspondence

• **Stage 3 — Alternative dispute resolution (if applicable):**
• Mediation: — a neutral third party helps negotiate a resolution
• Adjudication: — common in construction disputes (under the Housing Grants, Construction and Regeneration Act 1996)

• **Stage 4 — Court action:**
• Small Claims Court: — for debts up to £10,000 (you can do this yourself)
• Fast Track: — for debts £10,001–£25,000
• Multi-track: — for debts over £25,000
• Use **Money Claim Online (MCOL)** to file claims electronically

• **Stage 5 — Enforcement:**
• If you win a court judgment but the debtor still doesn't pay:
• County Court Judgment (CCJ): — damages the debtor's credit rating
• Bailiff enforcement: — court-appointed bailiffs recover goods
• Attachment of earnings: — payments taken directly from wages
• Statutory demand / winding-up petition: — for debts over £750 (company) or £5,000 (individual)

Costs: Court fees range from £35 (for claims up to £300) to £455 (for claims up to £10,000). You can usually add these to your claim.