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What is a Letter Before Action?
A Letter Before Action is the last document you should send before commencing legal action for debt recovery. In other words, Letters Before Action are final demands for payment sent as formal letters that remind your client or customer that they owe you money and request one last time that they pay, before you take legal action.
This document is for England and Wales only.
When should I use a Letter Before Action?
Use this Letter Before Action:
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to recover a debt that is owed to your business
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to take further action after a Second payment reminder letter has been sent and the debt remains outstanding
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when you intend to give a debtor a last chance to pay before commencing legal proceedings for debt collection and enforcement
This letter is for debts owed to businesses only. If you require a letter for debts owed to individuals, you can get a bespoke letter drafted for you.
Sample Letter Before Action
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Re: Invoice Number(s):
Final letter before commencing legal action
We are writing to you about the fact, despite previous reminders, there remains an outstanding amount of £ in respect of the above invoice(s). This amount was due for payment on .
Our credit terms stipulate full payment within days and this account is now days overdue.
If the full amount of the sum outstanding, as set out above, is not paid within days of the date of this letter, we will begin legal action, without warning, for a court order requiring payment. We may also commence insolvency proceedings. Legal proceedings may affect any credit rating. The costs of the legal proceedings and any other amounts which the court orders, must also be paid, in addition to the debt.
This letter is being sent to you in accordance with the Practice Direction on Pre-Action Conduct (the PDPAC) contained in the Civil Procedure Rules which stipulates that you should acknowledge receipt of this letter within 14 days. The court has the power to sanction your continuing failure to respond.
The amount outstanding can be paid as follows:
We await your immediate payment of the outstanding amount.
Yours sincerely,
About Letters Before Action
Learn more about making your Letter Before Action
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How to make a Letter Before Action
Making a Letter Before Action online is simple. Just answer a few questions and Rocket Lawyer will build your document for you. When you have all of the details prepared in advance, making your document is a quick and easy process.
To make your Letter Before Action you will need the following information:
Introductory details
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The debtor’s details (eg legal structure, name and address).
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The creditor’s (ie your) details (eg legal structure, name and address).
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If the creditor is a company, partnership or LLP, who is signing on its behalf?
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Will the Letter Before Action be printed on headed paper that includes the creditor's business name and address?
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On what date will the Letter Before Action be sent?
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Who is the Letter Before Action addressed to?
Debt
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What are the numbers of the invoices that haven’t been paid in full?
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How much does the debtor owe?
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When was the due date for payment?
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How many days is payment overdue by?
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Within how many days of an invoice becoming due must the debtor pay the amount due?
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Is there a contract in place with the debtor that specifies that contractual interest may be charged on the debt?
If there is a contract:
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Will contractual interest be claimed on the debt? If it will:
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What is the annual contractual interest rate?
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Was contractual interest claimed on the debt in the previous letter? If so:
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When was the previous letter sent?
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How many days have passed since the previous letter was sent?
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If there isn’t a contract:
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If the debtor isn’t a company, partnership, or LLP, are they a consumer (ie a private individual) or a business?
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If the debtor is a business (whether they’re a company, LLP, or another type of business), will statutory interest be claimed on the debt? If it will:
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What is the annual statutory interest rate?
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Was statutory interest on the debt claimed in the previous letter? If so:
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When was the previous letter sent?
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How many days have passed since the previous letter was sent?
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Payment
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Can the debt be paid by:
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Cheque?
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Bank transfer? If so, what are the bank details?
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Credit card payment? If so, what is the telephone number for credit card payments?
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Does the creditor offer the option of making an alternative payment arrangement?
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If so, what is their telephone number for arranging alternative payment?
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Common terms in a Letter Before Action
A Letter Before Action is the final payment reminder sent to a debtor before taking legal action to recover money owed. To facilitate this, this Letter Before Action includes:
Sender and recipient details
The start of the Letter Before Action provides details of the creditor and debtor, including their name and address.
The body of the Letter
The body of the Letter Before Action sets out details relating to the debt owed by the debtor. This includes:
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the invoice(s) the Letter Before Action relates to
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the amount of money owed
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when payment was due and how many days payment is now overdue by
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if relevant, the amount of interest due on the debt and how much this means the debtor has to pay in total
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a reminder that if the debt is not paid within a certain number of days, the creditor will begin legal proceedings (the cost of which must be paid by the debtor in addition to the money already owed)
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how the debt should be paid
If the debtor is a consumer or a sole trader with a contract, the Letter Before Action will also include details of organisations that provide free, independent advice and assistance on managing debt.
If you want your Letter Before Action to include further or more detailed provisions, you can edit your document. However, if you do this, you may want a lawyer to review or change the Letter Before Action for you, to make sure it complies with all relevant laws and meets your specific needs. Ask a lawyer for assistance.
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Legal tips for making a Letter Before Action
Send payment reminders before sending a Letter Before Action
A Letter Before Action is the final payment reminder you should send to a debtor. Before sending such a Letter, you should give the debtor ample time to repay the money owed. To do this, you should send a Debt recovery letter when a payment is overdue. If, after sending this letter you do not receive a response, you should send a Second debt recovery letter to inform the debtor that you will take further action if payment is not made. Only after sending the two debt recovery letters and waiting for the payment period set out in them to come to an end, should you send a Letter Before Action.
For more information, read Payment reminders and follow our How to recover debt checklist.
Consider entering into a repayment agreement
Entering into a repayment agreement with a debtor can help you avoid the hassle and expense of legal action. Repayment agreements set out how a debtor wishes to repay you any money they owe, typically over a longer period of time. A repayment agreement should typically be used if:
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you have sent the debtor payment reminders
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the debtor accepts that they owe you money, and
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they are willing to make arrangements for the debt to be repaid
Consider using a Letter accepting payments in instalments to accept a debtor’s repayment plan. You can also formalise your repayment plan using a Promissory note.
For more information, read Repayment agreements.
Consider alternatives to legal action
Legal action can be time-consuming and expensive. It is always worth considering taking alternative steps to resolve the problem before taking formal legal action on a payment issue. There are a number of different processes you could consider, including:
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using a debt collection agency - they will recover the debt for you and, if successful, you will receive a proportion of the amount owed, and the agency will keep the rest
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mediation - an independent person helps you find a solution to the debt problem
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arbitration - an independent arbitrator hears you make a legally binding decision
For more information, read Alternatives to legal action.
Understand when to seek advice from a lawyer
Ask a lawyer for advice:
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on debt recovery and dispute resolution procedures
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on debt recovery outside England or Wales (eg if the debtor is based in Scotland)
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as to whether an insolvency procedure is appropriate
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Letter Before Action FAQs
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What is included in a Letter Before Action?
This Letter Before Action template covers:
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the creditor’s (ie your) details and the debtor’s details (ie the details of the person or business owing you money)
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the amount owed (ie the debt)
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the date that the debt owing should have been paid by
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whether interest is payable on the debt (this will only be the case if the debtor is a business)
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automatic calculation of the amount of interest to be paid in total
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automatic calculation of the continuing daily amount of interest charged as long as the debt remains unpaid
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the intent to issue legal proceedings for a county court judgment (CCJ) if the debt is not paid by a specified deadline
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other enforcement procedures to recover the debt
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Do I need a Letter Before Action?
You need a Letter Before Action when you want to recover your debt and you intend to give the debtor a last chance for payment before commencing legal proceedings for collection and enforcement of the debt. This Letter will ensure that the debtor understands that this is their last chance to pay your business, and the consequences of not complying with the request to pay. It is also important to show the court (in the event of legal action) that you have made all possible efforts to contact the debtor to resolve the issue outside of court.
For more information on the debt recovery process, read How to avoid problems with debtors and our How to recover debt checklist.
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Can I use a Letter Before Action if there was no contract between the debtor and my business?
You can use this Letter if there is no contract between the debtor and your business. However, if there was no contract and you wish to charge interest, you can only claim statutory interest. This only applies to business-to-business transactions. Currently, the statutory interest is 8% plus the Bank of England base rate for business-to-business transactions. You cannot claim statutory interest if your customer is a consumer and not acting in the course of business. In such scenarios, you can only claim interest if your contract sets an interest rate.
For more information, read Calculating interest on commercial debts.
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How do I send a Letter Before Action?
As a Letter Before Action is a formal notice, it has to be properly served (ie sent to the debtor). Before sending a Letter Before Action, you should check your contract with the debtor (if one exists) to see what it says about the service of formal notices. You should follow any specific instructions set out in the contract when serving your Letter.
You can always serve your Letter Before Action in person (ie by handing it to the debtor) or by posting it (recorded delivery is recommended). You may also be able to email the Letter Before Action if this is allowed in your contract. For more information, read our Make it legal checklist.
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What if I don’t receive a response to a Letter Before Action?
Under the Civil Procedure Rules, if you receive no response to this Letter, you can start legal proceedings within 14 days. The Letter Before Action clearly explains this to the debtor.
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