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Can You Recover Debts During the Pandemic?

View profile for Martin Spencer
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Yes! Whilst we are asking our clients to take a ‘common-sense approach’ with their debtors at this time, we appreciate that cash flow is even more important now and in most situations, debt recovery action can still be taken. By common sense approach, we mean that if your debtor is a shop or company that has closed temporarily due to the Covid-19 pandemic, we are unlikely to be able to make any significant recovery as the prospects of making contact are going to be low.

All members of our debt recovery team are working from home, and we have staff working from the office who can still assist with sending out Solicitors Demand Letters (SDLs), pre-action letters and any other correspondence.

As the lockdown restrictions are starting to ease and shops re-opening, we anticipate that the prospects of recovering commercial debts will start to increase. We have found that where a debtor is an individual or sole trader, our efforts to make contact have, if anything, been more successful as the majority are either working from home or furloughed and unable to work.

Should we consider a payment plan?

In the current climate, it might be worth considering a payment plan if one is offered by your debtor. It would depend on the history of your debt and the debtor if a payment plan has been offered in the past and they have defaulted, they may be using COVID-19 as an excuse to try and get out of paying their debts.

If you have supplied goods or provided a service and invoiced your client in accordance with standard terms of payment, in normal circumstances, we would urge that you pursue your debts in full.

However, whilst we appreciate that cash flow is important to you, cash will also probably be tight for your debtors. You will have to monitor this on a case-by-case basis as every debtor is different but, if your debtor is genuine, you may wish to consider a payment plan if offered.

Depending on the level of the debt owed, it may be necessary to consider a payment plan option over 6 months with a view to reviewing this thereafter. We believe that recovering something is better than nothing.

Can we still issue legal proceedings and obtain judgment?

As mentioned above, there is no point in issuing a claim against a debtor to an address which is temporarily closed. Provided we are satisfied that the debtor will have sufficient opportunity to respond, we can issue proceedings and obtain judgment as normal.

The same applies when sending our pre-action correspondence as it will likely be sent to the same address as any form of a legal claim. We use Money Claim Online (MCOL) as our platform to issue most of our claims which is a court internet-based service for both claimants and defendants. It is a convenient and secure way of making or responding to a money claim over the internet. The claims are issued centrally at the County Court Money Claims Centre in Salford which sends a copy of the paper claim to your debtor.

Are the courts still open?

During this unprecedented time, the courts are continuing to work hard to stay open and resolve matters as efficiently as possible.

Courts have been categorised as open; staffed; and/or suspended. Open courts are open to the public for essential face-to-face hearings; staffed courts are not open to the public, but staff and judges will continue to work from these buildings; and suspended courts will be temporarily closed. In some cases, hearings have been adjourned to the autumn.

To ensure the safety of all parties involved, we are seeing an increase in telephone and video hearings to enable as many hearings to go ahead as possible remotely.

How is enforcement affected in the current climate?

Unfortunately, enforcement by means of the removal of assets has very much been affected as our agent’s efforts have been limited to trying to provoke payment via letter, e-mail, text, and telephone calls.

However, as lockdown restrictions are starting to ease, enforcement restrictions are going the same way. There are currently no restrictions on the enforcement of commercial debts and as more and more commercial premises start to re-open, our agents are now in the process of recommencing visits to recover your debts.

The only major difference is that to limit face-to-face contact, our agents will initially attempt out of hours visits. As has always been the case, if they are unable to communicate with the debtor at the premises, a contact letter will be left to try and prompt some sort of engagement. With consumer debts, restrictions are still in place and no enforcement visits can be made to a residential address until after 24 August 2020.

Can I still serve a winding up petition?

We can still serve your debtor with a petition however, the recent introduction of the Corporate Insolvency and Governance Bill 2020 has made this more difficult.

The court will not make a final order until the creditor can demonstrate that the pandemic is not the reason the company cannot pay its debts. The current Covid-19 outbreak has created financial stress for many companies.

Not all debtor companies will be affected, and we suspect that any companies faced with a winding up petition may use it for a reason for non-payment, making this method of debt recovery more difficult and expensive.