Debt collection and recovering money

This guide is intended to offer some general advice and assistance on recovering private debts. We also advise you to read the additional information at the foot of this page, and to be aware that the rules are slightly different for individuals and for businesses. 

Recovering money that you are owed is stressful, hard work and depressing. The first thing you need to tell yourself is to stop being nice. Start thinking about the dynamics of the relationship. Some people find it slightly distasteful, and Un-British, to chase debts. You should permit yourself to feel angry if you feel you have been let down, or if you think you’ve been taken advantage of.

The next thing to establish is whether or not the person (or company) that owes you the money has enough money or assets to pay you. If they don’t have it  then it is very unlikely you’ll get repaid.

Thirdly,  you need to know their identity and their postal address. Just having their email address or phone number may not be enough. In the case of a Limited Company, or an individual who is a director of one, their address is available from Companies House. If they are not a Limited Company you may be able to track them through other means.

If the person who owes you money is a private individual then it may be harder to establish their address and you may need to use a professional Tracing Agent to find them. Tracing Agents advertise their services widely on the internet.

Sending a formal letter – Letter Before Claim

The next step is to send a formal letter, originally known as a Letter Before Action, asking for the money to be paid. In this Letter Before Claim you need to mention

  • Why the money is owed (eg for work you have done).
  • How and when it was agreed that they would pay you (ie verbally, in writing etc). Include dates and copies of any contracts or letters, or any proof (such as bank statements or receipts) that support your case.
  • How much money is owed, together with any calculations supporting this figure, including interest (which may be ongoing), expenses, disbursements etc. If they have already repaid a part of the debt then this needs to be mentioned.

You can also suggest to them at this point that they consider mediation. You can offer this as an alternative to legal action. Doing this might help to establish trust, and it might increase your chances of a quicker settlement.

Inform them they have 30 days to reply. Send the letter by post (you can also email them a copy if you like). And use Recorded Delivery so you will know they have received the letter.

Court Fees are required for this. The amount will depend on the size of the debt.

When they receive your letter:

  • They may pay the debt in full.
  • They may agree to pay, but dispute the amount. Mediation can be especially useful at this stage, and we would encourage you to contact us.
  • They may agree to pay in instalments. You will need to decide whether this is acceptable, and you should agree what action you will take if they stop paying half-way through.
  • They may reply and give you reasons why they are not paying you anything.
  • They may not reply at all.


The next step – court action.

If they are refusing to pay anything, or refusing to reply, the next step is often to commence court action. 

Commencing court action does not mean you will have to go to court – they may well decide to pay you before then – but it is often necessary to force the debtor takes your claim seriously. Sometimes just taking the first steps of legal action is enough to get the debtor to reach for a settlement. 

You must bear in mind

  • It can take months or years for a case to go to court
  • There is no guarantee you will win.
  • If you lose you will have to pay their legal costs as well as your own
  • Even if you win, the court cannot enforce a judgement and you may need to get bailiffs to collect the money.
  • Even if you win, the other person will not be able to pay you back if they don’t have the money.

How does mediation help?

If there is a genuine disagreement about the 

  • Amount of money that is owed
  • Timing of installments
  • Process of repayment

then mediation can facilitate a creative, workable and practical solution much better than an arbitrary decision by a third party.

Mediation is voluntary, and requires the cooperation of both parties. If the person who owes you money refuses to take part in it then the process cannot work. But if both of you are willing to cooperate and understand each other then the solution you finally come up with can be the best for both of you. More information…

Mediation is confidential. This might be especially important if you don’t want the final terms of the settlement to be made public, or if there are reputational issues for one or other of you that are important. More information…

More information

Further reading

Is your debt problem suitable for mediation?

We can offer a free 30-minute telephone consultation that can help you decide.