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Company debt cannot be ignored, warns expert

12th August 2021

Company debt cannot be ignored, warns expert

A debt recovery expert has warned struggling businesses that failing to engage with creditors could end up costing them more – and lead to a damaging credit score.

Arshad Mohammad, Debt Recovery Manager at leading law firm Higgs LLP, said a surprisingly high number of businesses ignore attempts to chase debts and even court orders for payment, leading to the amount increasing before further action is required. 

Arshad said it is far better for debtors to communicate and negotiate with creditors to try and find an amicable solution.

“Debt cannot just be swept under the carpet,” he said. “A lot of people will ignore our letters and calls, but we have many tools at our disposal to recover the money.

“Creditors will often be willing to negotiate, especially if there is a good relationship in place.

“If it eventually ends in a County Court Judgment being awarded against the debtor, this will be on the debtor’s credit file for six years, having an adverse effect on the credit rating.”

Arshad said he was recently instructed by a landlord of a London property to recoup a £5,000 debt. However, due to a lack of engagement from the tenant, the amount spiralled to more than £8,000.

Arshad said: “We pursued the amount within our debt recovery strategy through the pre-action stages, however there was no contact from the tenant.

“We were instructed by our client to issue County Court proceedings, yet the debtor failed to respond to the Court claim, even though we were aware that the debtor was at the address and the documents were correctly served.

“We applied for a County Court Judgment which was granted and served on the debtor, but there was still no communication.

“Subsequently, we had no alternative but to proceed with enforcement action and instructed High Court Enforcement Officers to attend the premises to recover the debt or seize any assets that the debtor may own.

“The agents went to the registered address and, lo and behold, they managed to secure full payment there and then.

“Court fees, legal costs and agents’ fees added an extra £3,000 to the debt, not to mention the six-year negative impact on their credit file. It’s a typical example of how problems can spiral.”

Arshad said he expects to be busy in the months to come as insolvency restrictions brought in to help businesses throughout the pandemic may be eased.

Arshad said: “Unfortunately, it’s going to be a very tough time for many businesses. Some are clearly insolvent and should not be trading any more. We are going to be very busy as creditors try to reclaim as much of their debt as they can.”

For more information contact Arshad on 01384 327192 or Arshad.Mohammad@higgsllp.co.uk

 

 

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