How to Prepare For Legal Proceedings in Bad Debt Situations?

by Andrew Thomas Debt Recovery Rules and Limitations Related

For lenders and financial institutions engaged in lending funds, it is essential to take instant action on debts. Experts say that more time wasted on repeating the process of debt collection reduces the chance of successful recovery in bigger businesses as well as small business debt recovery. This repetition of the process includes sending letters, emails, calling the debtor, and several others and they are considered a wastage of time. The time you are investing in this could be used in running and growing your business.

The rule is very simple that if a debtor is unable to pay or sounds unwilling, you have the right to take recovery action and not fall to the side. The first attempt should always be to negotiate and while doing this, you should keep a record of all the communication attempted from your end. For successful debt recovery, you should not mind making a reasonable offer just to settle the debt fast.

But this strategy does not guarantee success every time and if you are also trapped in this situation, taking legal action becomes a necessity. If you have decided about this, you should use the following criteria to ensure that it's the right time to engage in these proceedings.

Proofs

As a part of the legal process, you will have to prove that you are owed money by the debtor and for this, some proofs would be required. They could be anything like documentation of the debt, such as the invoice or a witness to stand by your side and confirm your claim. Apart from this, a signed contract or a personal guarantee signed by directors can also be a very useful proof of debt. There are chances that the debtor might dispute the debt and you must think carefully about the strategies.

Time

According to the professionals of the debt recovery agency, obtaining and ultimately functioning the judgement is a time-consuming process and there is no guarantee that even after this process, the debt may be paid in full immediately. Therefore, you need to think about this and ask yourself if you could wait for your money. This is an important thing you that must account for before taking any step towards availing debt recovery services or taking any legal action against the debtor.

Costs

The cost involved in legal proceedings is also an essential factor to take into consideration. There is another option of commission-based debt collection services and you can factor the cost of this legal action against this type of debt collection service. You will find that these costs are usually recoverable in most cases. When hiring a solicitor for the same, just make sure to get a quote from the professional and even better step is setting up price ceiling. Other than these steps, using the services of a debt recovery agency that has an in-house legal team to help you is a really wise option in terms of debt collection.

A letter from your solicitor is enough to intimidate a debtor and prompt him to take action immediately. This letter is written in a friendly manner, but it often represents a threat related to court proceedings.