A regular client in the food manufacturing industry located in London instructed us to recover payment of an invoice of £4,253.04 that was four weeks beyond the agreed payment terms. The debtor, also based in London, manufactures a specific product which they supply to restaurants and take-aways.
Recent History of Court Action
At first look, it was thought this would be a straightforward debt collection. Upon further inspection of the debtor’s financial position, it became clear that the company was struggling to pay its creditors. The company had been incorporated some 16 years ago and had traded profitably for most of that time. However, something had gone wrong recently. In the last four weeks 3 County Court Judgments had been registered against the company totalling £54,664. They all remained unsatisfied. In all probability, there would be further claims still going through the Court system that would also result in CCJs being registered against the company. With this debt recovery, the threat of court proceedings would have no effect; it would most definitely not result in payment.
Debtors who are unable to pay all of their creditors often calculate that Court proceedings take time, and there will be opportunities for them during the process for them to settle and make the payment if their financial position improves. Even once a CCJ has been issued, they can settle it within 28 days and have it removed from their credit file. However, if a number of CCJs are registered against the company in quick succession, it will almost always eventually fold. The first one or two judgments may be satisfied while the debtor is struggling to get back on an even keel. The creditors who incur fees in issuing Court proceedings against a company with several unsatisfied County Court Judgments will simply be increasing their losses.
The Power of Insolvency Proceedings
There is another option. Provided you take action quickly enough, the threat of insolvency proceedings and the issue of a winding-up petition can position you ahead of other creditors. Even those who have obtained a Court judgment against the debtor.
That’s exactly what happened in this successful debt recovery. On the day of instruction, we issued the debtor company with a 7-day Notice of Insolvency Proceedings. The notice advised that if full payment, including Advocate’s fees, were not received within seven days of the date of the notice, our solicitors would be immediately instructed to issue a winding-up petition against the debtor company. The Notice also made clear the serious financial and commercial consequences of dealing with a winding-up petition,
The response was immediate. The debtor contacted our client on receipt of the Notice (they had ignored our client since the issue of their invoice). They attempted to persuade our client to cease the action with a promise of payment at the end of the month. Our client refused to negotiate with them, advising the matter was out of their hands and that they should contact Advocate.
They never did contact us. However, they made full payment the next day and within 48 hours of our instruction.
As you can imagine, our client was very pleased with the result. You can read their review of our service below.