what to do if a customer wont pay

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What's the legal process for getting my customer to pay upwards?

Here'south an overview of the key steps in collecting debt.

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  Belatedly payment demand or letter earlier activeness

  The first stride is to transport the customer a late payment need or letter of the alphabet before action. This is a formal letter which gives the client alarm that if they don't pay by a certain appointment (e.g. within seven days) you lot will take legal activity. It needs to detail the outstanding amount, and any interest and bounty costs you're charging. Many customers will pay up at this phase.

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  Courtroom proceedings

  If the customer doesn't pay up, the next step is to start court proceedings against them. In England and Wales, debts of upwardly to £10,000 are dealt with as pocket-size claims in the county courtroom. Claims of £10,001 – £25,000 are also normally dealt with at the county court. Claims of over £25,000 are dealt with in the High Court. You need to pay a court fee to start proceedings. For more details on taking court action against customers who've not paid you, including information on court fees, go to the brand a courtroom claim for coin section of GOV.U.k..

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  Court hearing

  If the courtroom decides that a hearing does need to take place – which will probably be the case if the corporeality is more than £10,000 – you'll need to pay some extra fees. For small claims hearings, y'all do not unremarkably require a solicitor, but information technology's advisable to use one for larger claims, especially as the loser can be made to pay the winner's costs. If the court finds in your favour – because the customer doesn't defend the claim or because it's resolved in your favour – it volition honour a judgement ordering the customer to pay upward. For small claims this volition be a county courtroom sentence (CCJ). If the customer doesn't pay within virtually a calendar month, the judgement gets registered confronting them, and remains in place for vi years, hampering their ability to get credit.

• 

  Mediation

  Courts are keen for disputes to exist settled without a hearing. For claims of less than £10,000 courts encourage you to apply their mediation service. If you're able to settle earlier a hearing you may get back some of your fees. A guess might non award you lot costs if they think yous've made little or no try to come to an agreement out of court. To detect out more than about the small claim arbitration service, go to the notice the right courts or tribunal folio of GOV.UK and search for your local courtroom.

If a court judgement is issued against my customer what happens next?

If a judgement is issued merely the client doesn't pay or falls backside in payments, y'all need to get the judgement enforced. Here are key ways of doing this, each of which involves court fees, which can be added to your merits.

One enforcement choice is to ask the court to go bailiffs or enforcement officers to collect the money. Bailiffs volition ask the customer to pay upwardly, and if payment's not received they will get to the customer's business or home to attempt to go the customer to pay them direct, or failing this, to run across if there'southward anything they can seize and sell-off to pay the debt.

Another option is to ask the court to brand a charge against the customer's land or property. This means that if they sell the country or property they must pay the charge (which is and then paid to you) before they go their money. Obviously, the customer needs to actually take land or belongings, and you may take to wait a long time before they sell it!

If your customer is employed (equally opposed to self-employed or a visitor) you can utilize to the court  for an attachment of earnings social club. This compels the customer's employer to deduct coin from their wages until the debt to you is cleared.

If your customer owes you over £750, y'all can effect astatutory demand. This ways that the client has 21 days to pay upwardly. If the customer is a limited visitor and they fail to pay upward, a petition can be issued for the winding-up (liquidation) of the company, which means that their assets must exist sold to pay off yous and other creditors, after which the visitor is dissolved.

If yous outcome a statutory demand to an individual (as opposed to a company) who then fails to pay upwardly inside 21 days, you can issue a petition to brand them bankrupt. If a court declares them bankrupt they volition need to give up avails and sell holding to pay you and other creditors.

How much will taking legal action price me?

That depends on factors such every bit:

• What actions your customer takes. E.g. if they pay upward as soon every bit they get notification of court action, y'all won't take to go any further, so this will cost you less than if they defend the merits
• Whether your claim is successful or not. If you win the case your customer will usually have to pay your court fees; if you lose you may cease upward paying all your costs, courtroom fees and as well the customer's costs, which can be expensive for higher claims
• The corporeality you're trying to recover. There's a sliding scale of court fees according to the value of the claim, ranging from £35 for amounts up to £300, through £115 for amounts of £1,500 – £3,000, to v% of the value for amounts of £x,000 – £100,000
• How much you do yourself as opposed to involving others, such equally solicitors. Many firms will accept sliding fee scales, east.g. to initiate court activeness to attempt to recover a sum of £500 they might charge £150; for a sum of £5,000 they might charge £250; for a sum of £15,000 they might charge 5% of the corporeality.

How do I make up one's mind whether it'southward worth taking legal action?

Taking legal activeness is no guarantee of getting your coin – at that place's a take chances that you may end up paying legal and court fees but withal not become satisfaction. In deciding whether to take legal action yous need to advisedly weigh-up the costs against the likelihood of really getting the invoice paid. Satisfy yourself that you're not throwing expert money after bad.

Before you lot start legal proceedings, attempt to observe out about the trading position of your customer, eastward.grand. if they're subject area to insolvency or bankruptcy proceedings it may not be worth taking legal action – their avails will be frozen so they can't pay you even if they want to. Eventually you'll exist contacted by the insolvency practitioner but oftentimes at that place won't be enough coin to pay anyone except what are chosen the preferred creditors (including HM Revenue and Customs, banks, employees). If and so, y'all'll probably exist a long way down the list!

To find out if a customer, who is an individual or sole trader, is broke go to the search the bankruptcy and insolvency annals department of GOV.United kingdom of great britain and northern ireland.

To discover out if a client, which is a company, is being wound up, become to the check if a company is beingness liquidated or in provisional liquidation department of GOV.UK.

What legal action tin I take by myself?

If you lot're owed a sum that'southward less than £100,000 by a person or organisation with an address in England or Wales, the easiest manner to take legal action yourself is to make a court claim is past using Money Merits Online. The steps you need to follow are shown below.

Last belatedly payment demand letter of the alphabet or alphabetic character earlier action

Final belatedly payment demand letter or alphabetic character earlier action –This is the first office of the procedure. In well-nigh cases the act of sending one of these letters will be all that is needed to get a belatedly payer to settle a pecker. A letter of the alphabet before action sets out what is owed past the tardily payer. Information technology will give the customer a set time to pay the outstanding bill.

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Earlier starting whatever legal proceedings a alphabetic character of action must be sent or costs may be forfeited. A late payment demand is an alternative to a letter before activity. Information technology allows you to merits interest, compensation and reasonable debt collection costs under the Late Payment of Commercial Debts (Interest) Human activity 1998.

Make sure that you lot've got your facts right and that you've sent the customer a terminal late payment need letter or letter before action in which you lot requite them an accented last deadline by which to pay and state that you'll take legal action if they neglect to pay. If yous require help with your letter yous may wish to consult a solicitor. They tin can charge from £1.fifty plus VAT to create and send a letter on your behalf.

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Money Merits Online

Money Claim Online –Yous can utilize HM Courts and Tribunals Service Money CIaim Online (MCOL) to merits a stock-still corporeality of money of less than £100,000.

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To apply Money Claim Online you'll need to pay a fee. This varies according to the value of the claim. Y'all'll be taken to the Uk Government Gateway to register. Then it should only take you about 30 minutes to complete the online form. Stick to facts and don't get personal most the people who owe you money. If using the postal service yous volition need to employ pre-printed court forms or obtain one from your local court.

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Court alphabetic character

Court letter –Your customer will be issued with a courtroom alphabetic character, which in many cases will be enough to prompt them to pay the outstanding debt and interest.

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If they practise pay, you lot need to allow the Money Claim Online help desk know that you're withdrawing the claim.

If your customer doesn't pay up, you'll take the option to apply for a County Court Judgement confronting them, and and then go through the process described in the sections above regarding the hearing, judgement and enforcement.

For any assistance or advice the Money Claim Online helpdesk can be contacted by:

Electronic mail: mcol@hmcts.gsi.gov.u.k.

Telephone: 0300 123 1057 or  01604 619 402
Monday to Friday, 8:45am to 5pm.

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How can solicitors and debt collectors help me through the legal process?

There are many solicitors and agencies who specialise in recovering debts. They can help y'all with specific parts of the legal procedure, or handle the entire affair for yous. Of grade, they will charge you lot for their services, so shop effectually to compare prices.

Solicitors will exist able to quote for specific tasks such every bit writing and sending a final demand or letter before action, representing yous at a hearing, preparing a statutory demand, etc. For other tasks that tin can't exist quantified so easily, they will unremarkably charge an hourly rate.

Some firms will accept sliding scales for fees depending on the amount of the debt. If your claim is successful y'all may be able to recover some of these costs. Some won't charge a fee unless they are successful, merely they're probable to be expensive.

Some ways of enforcing court judgements can be tricky and potentially expensive if you get things wrong (see the next section). In these circumstances, always take legal communication.

Brand sure that you discover out what the legal fees are probable to exist for your specific circumstances, and don't forget that you lot'll too need to pay court fees.

To find a local solicitor who specialises in debt recovery, go to the Constabulary Order's solicitor database.

Can I just issue a statutory demand instead of first going through all of the court processes?

A statutory demand is one way of trying to get a customer to pay up in one case a court judgement has been fabricated against them (see the above section).

Nevertheless, it can be tempting to jump straight in with a statutory order as the threat of liquidating a business or making the client bankrupt tin be persuasive in getting them to pay up. Just courts tin take a dim view of using a statutory demands as a debt collecting technique to short-cut the normal process for getting a judgement.

If you lot plan to upshot a statutory need, be sure that the customer won't dispute the debt. If they manage to get the need set bated, or get an injunction confronting a winding up petition, you're probable to be made to pay their legal costs, which could run into thousands of pounds.

Retrieve that your ultimate aim is to get the customer to pay up. If they're made to liquidate their business or are declared bankrupt, you may observe that you're just one of many creditors waiting for payment, and worse still, you may be at the lesser of the list and non get anything.

For information on statutory demands, go to the Make and Serve a Statutory Demand, or Claiming One section of GOV.Great britain.

What are the VAT implications if a customer doesn't pay my invoice?

If you're VAT registered and you invoice a customer but they don't pay up you can reclaim the VAT you charged and paid equally bad debt relief providing that certain weather are met including:

• the debt is more than than half-dozen months quondam but less than iv years and six months old

• you've written the debt out of your customer ledger and moved it into a specific bad debt business relationship.

If then, and you have evidence that shows you've tried to go the client to pay the invoice, you can recover the VAT by including the amount you're challenge in Box 4 of your VAT render.

If you've claimed a refund merely later the client pays up, you have to repay the VAT element. Put the amount you're repaying in Box 1 of your VAT return for the menstruation in which you received the payment.

If you're using the VAT cash accounting scheme or one of the retail schemes, bad debt relief isn't applicable every bit you only pay VAT on amounts actually received from customers.

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Source: https://informi.co.uk/business-administration/how-do-i-deal-customers-will-not-pay