On 1st October 2017, new rules will come into force for bringing debt claims. The rules will apply to any business claiming payment of a debt from an individual and do not apply to business-to-business debts, unless the debtor is a sole trader.
Under the new rules (known as the Pre-Action Protocol for Debt Claims), the creditor business will now be required to follow a formal procedure prior to commencing court proceedings. This includes;
Taking steps to avoid court proceedings (such as attempting to negotiate a settlement, considering a repayment plan, etc);
Sending the debtor a formal letter of claim which must include prescribed specific information (such as amongst other things, debt amount, calculation of interest, full details of the agreement leading to the debt and the creditor must provide a financial statement for the debtor to complete);
- Allowing the debtor to respond within prescribed time limits;
- Disclosing relevant documentation.
The purpose of the new rules is to encourage the parties to seek a resolution without the need for court proceedings.
When taking steps to recover a debt after October, compliance with the new rules is important as defiance may lead to the court imposing sanctions such as staying the proceedings, ordering the party at fault to pay the costs of proceedings or depriving the creditor of interest on the debt being claimed. As such, when looking to bring a debt claim, it is advisable to seek specialist legal advice.
To speak to a specialist at Farleys Solicitors regarding debt recovery, please call 0845 287 0939 or email us today.