New legislation- How Court Proceedings will soon become a lot more difficult

In a nutshell- what’s changing?

If your debtor is a private individual or sole trader, as of the 1st October 2017, trying to get back what is rightfully yours through the Court is going to be significantly more difficult than at present. From this date onwards,
threatening your debtor with a Letter Before Action will no longer be sufficient. Typically a single A4 page giving the debtor only 7 days to make payment, a Letter Before Action is currently issued before a claim form at Court however things are set to change in the not too distant future.

New legislation coming into effect as of 1st October 2017 will require creditors to issue a bundle of documents (up to 10 pages) rather than the single document and will give debtors 30 days to reply giving them more time to settle their outstanding account.

The main point of this new legislation is to encourage everyone involved to resolve the financial matter is a reasonable and fair matter, without the need to engage in litigation.

The nitty gritty detail- what’s included?

A letter of claim will soon need to be sent by the creditor to the debtor which will include the following details:

  • An up to date statement of account
  • Details of any interest, administration or other charges applied to the debt
  • Details of the agreement under which the debt arises
  • Details of any assignment of the debt
  • Details of how the debt can be paid and how to proceed if the debtor wishes to discuss payment options

It is important to note that the creditor must include a reply form, a financial statement form as well as an information form along with all of the supporting documents to the debtor in question.

For ease and flexibility, the letter of claim can be sent by email so long as it is clearly dated and also sent by post. From here on in, the creditor must allow a period of 30 days giving the debtor an opportunity to reply before issuing Court proceedings.

While it is stipulated that the creditor must include a reply form, it is not mandatory for the debtor to reply using this form. That said, the reply directly asks the debtor to either admit the debt partially or in full, or proclaim that they are not aware of the debt, or whether they dispute the debt entirely.

Striving for a result

If the debtor admits liability and requires some time to pay and settle the account, they are encouraged to complete the financial statement form. Here the information form must provide information in terms of debt advice and guidance as well as organisation addresses, whereby the debtor can take advice regarding their debt.

Lastly, the information form concerns itself with any documents that are being supplied, or any documents that the debtor has requested. In the instance that the debtor asks for copies of documents, it is essential that these are supplied within 30 days, or else a valid reason must be given why they are unable to be made available.

It is significant to note that this does not apply to B2B (business to business) debts unless both parties / the debtor are sole traders. While this will reduce the issues where the Court is concerned, it is likely, in the long term, to cause additional expense and administration costs for the creditor. What’s more, the extended time involved in issuing proceedings exposes the creditor to further unnecessary risk, giving the debtor opportunities to move their assets away and out of reach of the creditor.

Regardless of the technicalities, the new legislation will be coming into effect from 1st October 2017. Failure to comply with the latest updates could result in significant cost implications and/or complete dismissal of claims entirely so take note. Don’t get caught out with the latest legislation in terms of court proceedings- if you have any questions or require help with overdue accounts, get in touch with our dedicated team of debt collection agents.