Personal Debt Recovery

The court will expect both creditors and debtors to have acted in a way that avoids court action where possible. Both parties need to provide an appropriate amount of information to enable you to understand the other’s position on the case. If an agreement can be reached out of court this is always preferred.

A letter of claim has to be sent to the debtor first through a personal debt collection agency. This needs to include certain information:

• The amount of the debt and whether interest has been added.
• Who made the agreement, if there is no written agreement, what exactly was agreed and where and when it was agreed.
• Where a signed written agreement is in place, it needs to state the date, who signed it and inform the debtor that they can ask for a copy.
• Where the debt has been sold to a debt collection agency it needs to detail who the original creditor was, the amount of the original debt, when the debt was sold and the company it has been sold to.
• Where a debtor has already made an offer to pay in instalments there needs to be an explanation of why court action is being considered.
• The letter needs to give details of how the debtor can pay and contact information so that they can discuss payment.
• There needs to be an address where the debtor can send the completed form.

Along with the personal debt recovery letter you should also send:

• An information sheet explaining the debtor’s rights and what they should do next.
• A reply form that they have to send back to you within 30 days.
• A statement of means form.

The debtor then has 30 days from the date of the letter to reply. This can be to make an offer of payment, to inform you that they are seeking debt advice, or to ask for more evidence of the debt. Where they ask for any documents or information you need to provide this or explain why you can’t, within 30 days.

The Limitation Act 1980 outlines how long you have to take action to recover a debt. The time limit starts from the ‘cause of action’, which is different for different types of debt.

The limitation period for unsecured credit debts is six years. If before this time you have not obtained a county court judgement against the debtor, they have not made a payment towards the debt and they’ve not written to admit owing the debt it will be statue-barred. This doesn’t mean that you can no longer try and recover the debt, but it may no longer be enforceable if the debtor chooses not to pay.