As a business, it can be challenging when an invoice becomes overdue, and you have to start the process of “chasing.”
You need to be paid for the products or services you have provided; however, collecting from individuals takes it to a personal level.
For example, how long should you give people before chasing them? What collection processes should you start with? How can you work with the debtor to better understand their circumstances while maintaining your cash flow for business?
At Direct Route, our team understands all aspects and areas of debt collection, including recovering debt from an individual.
That’s why we use our years of experience and expertise to work on a case-by-case basis, supporting businesses in successfully collecting outstanding debts while maintaining working relationships.
To learn more about our processes and debt collection services, go to our page online or email us at memberbenefits@directroute.co.uk; we’d be happy to help.
Guide on how to recover debt from an individual
Businesses need their invoices to be paid in order to stay in business.
However, not every invoice is paid on time, every time and in these instances, your credit teams will have to take a different tact.
When collecting debts from individuals, it’s important to know that individuals have more legal and regulatory safeguards than companies. Hence, navigating debt collection can be much more challenging.
This is when working with a specialist debt collection team can help.
Debt collectors, like Direct Route, understand this area and what steps and protocols work best to recover debt successfully.
In addition, before jumping straight to court action, you must show that you have taken all appropriate and possible actions to collect the debt – and this is something we do and ensure.
Tips on how to recover debt from an individual
Contact the debtor – the first step is to speak to the debtor as soon as the invoice becomes overdue. Find out what is going on. Has there been a change in circumstances? Are things going to change? Is there a possibility of coming to an agreement? The key is to try and maintain a good relationship. Explain the debt is outstanding, the terms they signed up to, and the impact this outstanding debt has on your business. Encouraging an open dialogue is the best way to work toward a solution.
New payment terms—If the debtor is currently facing a period of hardship, can you introduce new payment terms to help? For example, could you extend the repayment period or reduce interest?
Payment plans—Have you considered setting up a payment plan with the debtor? Would this help support the debtor and provide you with a commitment to pay? Could you offer partial settlements?
Work with a debt collector – professional collection agents have the strategies, experience, and training to deal with all situations. Helping to take away the burden, time, and resources of collecting commercial overdue invoices, working with a professional debt collection team can reap successful results.
Issue a Letter Before Action – typically, when an individual has failed to pay, and you now have an overdue invoice sitting on your system, a Letter Before Action will be issued, and in most cases, is enough to spur people into paying. This letter details that payment should be made within a set period before next steps and legal action may be taken against the individual. The letter must outline what the debt is for, if late payment charges and additional interest will be added, payment deadlines, how the individual can settle their debt, and more.
You will also need to point the debtor to the relevant organisations that can support them with free debt advice and include a reply form and a financial statement form.
From here, the debtor will have 30 days to respond to the letter. If the debtor informs you that they are seeking debt advice, as the creditor, you must provide them with “breathing space.”
Breathing space can include:
- Standard breathing space gives legal protection from the creditor for up to 60 days, during which time the creditor must pause all enforcement action and freeze any interest or late payment charges.
- Mental health crisis breathing space – if someone is receiving mental health support, the breathing space timeframe will last as long as their treatment plus 30 days.
All action must stop immediately if a debtor is in breathing space.
If there is no response to the letter within 30 days, you can begin with court proceedings, which could include the following:
Look to apply for a CCJ. There are costs associated with applying for a County Court Judgment, but it can motivate individuals to pay. If the courts grant the CCJ, you will then be able to instruct county court bailiffs to collect the debt on your behalf, with high court enforcement officers seizing goods according to the value of the debt. However, applying for and being granted a CCJ can be a long, drawn-out process, so you must weigh the pros and cons.
Obtain a third-party debt order. This debt order will freeze the debtor’s assets and allow the creditor to recover the invoice unpaid sum directly from their account.
If the debtor cannot repay their debt in any circumstance, you can apply for a bankruptcy order, and a statutory demand is the first step in this process before you apply for a bankruptcy petition.
Commercial overdue invoice
The team at Direct Route consists of specialists who recover commercial debt from individuals. We provide a range of collection solutions and processes and treat each case uniquely to find the most appropriate solution for a higher chance of a successful collection.
If you would like further support in recovering debts from individuals, contact us today at 01274223190.