Contractors’ Questions: What if my debt collection agency gives up?

Contractor’s Question: I'm still chasing a client for a number of unpaid invoices that are overdue by several months. I've employed a debt collection agency to chase the debt, but they are no longer responding to my emails. Is my only recourse to approach a solicitor? Or is it best to persevere with the agency, or could the solicitor do that for me as well as hopefully recoup the monies owed? And importantly, will the fee for the solicitor be so high that it would make appointing them prohibitive?

Expert’s Answer: It is unusual that your debt collection agency has gone quiet; understandably this won’t be filling you with confidence that they are pursuing your debt vigorously.

A lot depends on how much is owed to you, whether your client disputes what you claim, and whether it’s a case of can’t pay or won’t pay.

If you are owed £5,000 or less, the courts call this a “small claim.” The relating court procedure is simplified and less formal and people are generally expected to conduct such cases themselves without solicitors. If you did employ a solicitor for a small claims case, you won’t generally be allowed to pass on any of their fees to your client.

For your reference, solicitors are not allowed to charge a percentage of what you win if the case goes to court but their fees will certainly be thousands of pounds, and most (but not all) solicitors are not really interested in the type of work you require. You might be better off with a debt collection agency, not necessarily the one which you have already engaged, in such circumstances.

If there is a dispute about the sum (‘won’t pay’), you should certainly consider using a solicitor as they will usually have more experience of dealing with disputed claims. Don’t be frightened to shop around for solicitors. A lot will give free initial advice to see whether you have a good claim and whether they can help. Don’t be frightened to ask how they charge and how much it will cost - solicitors vary. But don’t make the mistake of just going with the cheapest; they might not be the best. It’s more important that you get on with the solicitor and feel that he or she will do a good job for you.

If it’s a case of can’t pay, you should think carefully before taking any action. You might otherwise simply be wasting your money – a court judgment is, after all, just an expensive piece of paper if the client can’t afford to pay. If, however, it is a matter of won’t pay and your claim is over £5,000, you might have to issue court proceedings to force them to take your claim seriously. Discuss this with a solicitor and take advantage of some free initial legal advice. But a solicitor probably wouldn’t work with your debt collection agency; it’s a matter of using one or the other.

The expert was Gary Cousins, solicitor and founder of Cousins Business Law, a legal advisory for small businesses.

Friday 27th May 2011
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