If only we lived in a world where all of our clients paid on time, and in full. Yet sadly, this is not the case, as some debtors show a complete disregard for their formal commitment to pay.
The process of recovering a non-payment can be exhausting, and in some cases, have a significant impact on a creditor’s mental wellbeing. Feelings of anger and frustration often lead to creditors feeling overwhelmed by the gravity of the situation they face.
But creditors are not alone. And they do have options.
1 – Hear them out
Opening up a line of communication between creditor and debtor can be an effective way to resolve matters before they escalate. It is also a proactive way for creditors to establish the nature of the debtor’s circumstances.
If creditors take this more holistic approach when dealing with debtors, they aim to support them in finding out why they have fallen into financial difficulty. This lighter business approach will allow creditors to distinguish whether or not the debtor has a genuine financial hardship. Creditors may be in the position to discuss monthly repayment plans to further support debtors. When taking this step, it is advisable to make a formal record of all communications, whether email or verbal.
However, many creditors become disenchanted with this time-consuming approach, as they are often dealing with customers who have the ability to pay, yet are refusing to do so.
2 – Bring in the mediator
Mediators are skilled in the art of negotiating. If creditors seek their support, mediators will work with both parties until an agreed deal is reached. However, both parties must be willing and open to work together to reach a settlement.
For creditors who find themselves dealing with a challenging debtor, this option may prove ineffective.
3 – A final warning
If creditors feel the mediation process does not suit their individual circumstances, then a creditor can send a Letter Before Action (LBA), or a Final Warning letter. The letter should clearly state: what monies are owed; a timeframe for the repayment; any consequences for late payment, and a summary of intended proceedings, should the matter escalate.
Strictly speaking, the support of a solicitor is not required in the writing of such a letter, but using one can increase a creditor’s chances of reclaiming a debt successfully. Solicitors’ fees do vary for completion of this service.
If the creditor does not want the matter to be forfeited in court, an LBA must be sent to the debtor. A detailed and verified proof of postage is also advised.
Do remember, creditors must adhere to the latest Pre-Action Protocol for Debt Claims if their debtor is a sole trader.
4 – Involving the courts
If the debtor is refusing to pay yet has the funds, is working the system, is withholding the payment on principle, or is refusing to take responsibility for their debt, then court proceedings can be an effective method to reclaim money.
Before taking a case to court, creditors may be asked to outline how they have complied with industry codes of practice in their handling of the case. Working within industry guidelines is an imperative step for creditors, as the responsibility for ensuring an inappropriate financial case does not come to court lies with the creditor.
Over the past decade, there has been a downward trend in the use of the courts by creditors, who are instead opting to use debt collection agencies in order to reclaim their money. Even prior to the outbreak of Coronavirus, securing a hearing in court took an average of 30 weeks. With the now inevitable backlogs, waiting for a case to be heard in court can be both a lengthy and draining process.
5 – Use a debt collector
Many creditors are now choosing debt collection agencies (DCAs) as a preferred way to recover their money.
Debt collectors offer a stress-free way to reclaim funds, and at minimum cost. Once the debt is sold to the debt collection agency, it is then their job to reclaim the money and return it to the creditor.
Despite their often fearsome reputation, professional debt collection agencies work to the same high standards as the best practice seen in the credit industry.
If you are owed money, and want it returned quickly and efficiently, then contact Cobra Financial Solutions today. Let us take the stress away from the reclaiming process, whilst upholding your reputation. You don’t have to deal with your debtor any longer. Leave it to us.
Contact Cobra Financial Solutions on 0151 526 4222.