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Identify the relevant parties involved and what you are owed. The party that owes you money is called a ‘debtor’.


Check any agreements you signed or made with the debtor (such as relevant Invoices or Terms and conditions) to determine how long the other party has to pay. 

Agreements don’t need to be ‘legal documents’. Debt agreements may be oral but having written evidence that the debtor owes you money will strengthen your claim. Consider gathering any messages exchanged, bank transfers or witnesses that were there when money was exchanged that show that funds were given to the debtor.


Consider whether you want to claim interest on the debt owed and check any documents you have in place to determine the type of interest you can charge.

There are two types of interest:

  • contractual interest - this is found in the agreed payment terms, on the order or in the contract. If there is no such agreement, contractual interest cannot be claimed.

  • statutory interest - this is the interest rate at which the law allows creditors to charge interest for late payments. This is currently 8% plus the Bank of England base rate. You can’t claim statutory interest if your customer is a consumer and not acting in the course of a business

If your agreement sets out a contractual interest rate, you can only claim statutory interest instead of contractual interest if your agreement expressly allows this.


If you are recovering money from a business, you can charge a fixed sum for the cost of recovering a late commercial payment on top of claiming interest. This sum is set by the law and depends on the amount of debt being recovered. You can recover:

  • £40 for debts up to £999.99

  • £70 for debts between £1,000 and £9,999.99

  • £100 for debts of £10,000 or more


Use a Debt recovery letter to formally remind individuals or businesses to make a payment.

This reminder letter details all the necessary information including when the payment was due, the amount of interest and the next steps if the debt is not settled.


If the debt is not settled send a Second debt recovery letter to remind debtors to make a payment. 

Sending this document helps ensure that the other party understands the consequences of not settling the payment and/or a threat of legal action.


If the other party does not respond after receiving the debt recovery letters and/or you are still owed money, consider creating a Letter before action

This is the last letter you should send before commencing legal action to recover a debt and details all necessary information regarding the debt, including how long the debtor has to pay before legal proceedings will be brought against them.


Consider offering debtors the option to make an alternative payment arrangement, allowing the debtor the option to pay back any money owed in fixed instalments. Doing this can avoid the expensive and time-consuming process of going to court.

You can accept such an alternative payment arrangement by using a Letter accepting payments in instalments

See Repayment agreements for more information.


If the debtor doesn’t dispute that money is owed and the amount of debt, consider instructing a debt collection agency. Debt collection agents can engage solicitors and take legal action to recover your money.

If successful, you will receive an agreed proportion of the total amount owing, while the agency will keep the rest.

The Credit Services Association (the industry association of debt recovery agents) has a list of members you may wish to use to recover your debt.


Where the debtor accepts that money is owed but disputes the amount, consider taking an alternative to legal action, such as:

  • mediation - this may help the parties arrive at a compromise (although any agreement made is entirely voluntary)

  • arbitration - this is a step up from mediation where an independent arbitrator hears both sides and makes a binding decision (which precludes further court action)

  • issuing a statutory demand - if the debt is not paid within 21 days, you can apply to wind up the company or make the individual bankrupt. This is a radical step and should only be taken if the relationship with the debtor has broken down irretrievably


You can make a court claim for your money if you’ve exhausted the existing routes. 

Be careful when considering taking a debtor to court. Even if the court action is successful, there is no guarantee that the debt will be recovered. If the debtor has no assets or other debts are outstanding against them, it may not be possible to enforce the judgment against them.

If you decide to issue a claim against them, this can be done online or using hard-copy forms. The process depends on whether you’re in England and Wales or Scotland.


In England and Wales, you can make a claim online if the money owed is less than £100,000, is owed by no more than 2 people or 2 organisations and the claim is sent to an address in England or Wales with a valid postcode. 

If you're making a claim for an unspecified amount, you will need to make a paper claim using Form N1. Depending on the complexity of the case, it will then either be allocated to the Small claims track, Fast-track or Multi-track. For more information, read Small claims court.

If successful, the courts will make an order for the debtor to pay the money.


In Scotland, money claims for up to £10,000 are brought in the Sheriff Court through either the:

  • simple procedure - where your case is worth less than £5,000 and isn’t complicated, using Form 3A, or

  • ordinary cause - where your case is worth more than £5,000 and is complicated. Where this is the case, assistance should be sought from a lawyer

For more information, read Small claims court in Scotland.

If successful, the courts will make an order for the debtor to pay the money.


If a debtor does not comply with a court order for payment relating to the claim, you will need to apply to the courts to have a court order enforced.



For more information, read Recover debt and Issuing a money claim. If you’re in doubt or have questions, don’t hesitate to Ask a lawyer for further guidance.

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