Industry debt specialists have witnessed a “huge increase” in attempts to recover debt following the end of government protections against insolvency at the end of March.
Travlaw partner Krystene Bousfield highlighted a surge in debt recovery, saying: “We see a huge increase in businesses either seeking to recover money or being pursued for money and being threatened with legal action.”
Speaking on a Travlaw webinar, Bousfield said: “A number of our clients have received notice of winding up actions.
“We act for both sides on debt recovery – companies taking action against those who owe them money or being pursued for money.”
The government introduced temporary relief through the Corporate Insolvency and Governance Act (CIBA) of June 2020 which suspended winding up orders or compulsory liquidation.
These began to be phased out from October last year when a debt threshold of £10,000 was placed on winding up petitions until March 31. However, since April a creditor can apply to court to liquidate a company owing as little as £750.
Bousfield said: “Government legislation to help business by postponing winding up actions is now over.
“If you want to recover money and the debt is not disputed, don’t just issue a claim. That benefits no one. Check your contracts and agreements, make sure your own accounts are in order.
“Have you attempted to negotiate? Do you have evidence of non-payment? You don’t want to spend money on recovering money.
“Clarify your expectations. Would you be happy with a payment plan? Are you entitled to interest? Can you use that to negotiate by saying ‘We won’t charge you interest’?”
A debt specialist will then set these out in a letter, said Bousfield, arguing: “In more cases than you think, a letter opens the way to payment. It opens negotiations.”
She advised businesses which owe money: “You need to take action as soon as possible.
“Have your paperwork in order. Is the debt agreed or disputed? Have you made any payment proposals? If so, make sure you stick to them. Identify any payment demands and make realistic and affordable proposals [for payment].”