As from 1st October 2017, trying to recover your money through the Court is going to be considerably more labour intense if your debtor is a private individual or sole trader. As from this date, it will no longer be sufficient to threaten your debtor with a Letter Before Action (a single A4 page which usually gives the debtor 7 days to make payment) prior to issuing a claim form at Court.
New legislation coming into force on 1st October 2017 requires creditors to send a bundle of documents to the debtor which can be up to 10 pages and give the debtor 30 DAYS to reply.
The aim of the legislation is to try to encourage both parties to resolve the matter fairly and reasonably without having to engage in litigation.
The creditor now has to send a letter of claim to the debtor which will include:
- An up to date statement of account
- Details of any interest, administration or other charges applied to the debt
- Details of the agreement under which the debt arises
- Details of any assignment of the debt
- Details of how the debt can be paid and how to proceed if the debtor wishes to discuss payment options
In addition, the creditor must provide a reply form, an information form and a financial statement form. The letter of claim must be clearly dated and sent by post, although it can also be sent by email as well on the same date as the letter is posted. The creditor must then give the debtor a period of 30 days to reply before issuing Court proceedings
The debtor is encouraged to use the reply form to respond but this is not mandatory. The reply asks the debtor whether they admit the debt in full or in part, or whether they do not know about the debt or whether they dispute the debt.
Next, if the debtor admits the debt and requires time to pay, they are encouraged to complete the financial statement form. The information form must provide information about debt advice and organisation addresses where the debtor can take advice regarding their debt. The final part of the information form deals with documents that are being supplied or if any documents are requested by the debtor. If the debtor requests copies of any documents, these must be supplied within 30 days or a reason must be given why they cannot be made available.
This is a very broad attempt to explain the legislation and thankfully it does not apply to business to business debts (unless the debtor or both parties are sole traders) in summary, whilst this will narrow the issues where the Court is concerned it will (in the writer’s opinion) cause more administration and expense for the creditor and the extended time for issuing proceedings will put the creditor at further risk of the debtor putting their assets out of the reach of the creditor.
Nevertheless, this will come into force from 1st October 2017 and failure to comply could mean that there could be serious costs implications or that claims could be dismissed entirely.
We are preparing a new pre-action protocol pack in readiness for this and if anyone needs any assistance with this, just give us a call on 0151 229 1071 or send an email to: [email protected]