If your company fails to pay its invoices to creditors, there are several actions that these creditors can take. Firstly, they may send reminder letters or make phone calls to request payment.
If payment is still not forthcoming, they may take legal action against your company by issuing a formal demand for payment or commencing court proceedings. In some cases, they may also engage the services of debt collection agencies to recover the outstanding debts.
If the creditors are successful in their legal action, they may obtain a court order to seize assets or funds from your company to repay the debt.
Additionally, failure to pay invoices may negatively impact your company’s credit score and reputation, which could make it more difficult to obtain credit or do business in the future.
It is important to maintain good relationships with creditors and prioritise timely payment of invoices to avoid these potential consequences.
These are the actions you can take to deal with legal action and pressure from creditors.
If your company is facing legal action and pressure from creditors, it is important to seek professional legal advice to understand your rights and options. You can also consider negotiating payment plans or settlements with creditors to manage your debt obligations and avoid further legal action.
Here, we go over the specifics of each action and what you may do to stop them.
Late payment reminders and demands
Late payment reminders and demands are common practices used by creditors to prompt debtors to pay outstanding invoices. These reminders are typically sent in the form of letters or emails that provide details of the overdue invoice, the amount owed, and the payment due date. In most cases, late payment reminders are sent a few days or weeks after the payment due date has passed, and may include a statement of the potential consequences of continued non-payment, such as legal action or debt collection.
If late payment reminders do not result in the debtor making the necessary payment, the creditor may escalate the situation by issuing a formal demand for payment. This demand typically sets out the details of the outstanding debt, the consequences of continued non-payment, and a deadline by which payment must be made to avoid legal action. It is important for debtors to take such demands seriously and to seek legal advice if necessary, as failure to respond or make payment by the deadline may result in the creditor commencing legal proceedings to recover the debt.
What actions can be taken?
In general, it is in the best interests of debtors to communicate openly and proactively with creditors about any payment difficulties, in order to avoid the need for late payment reminders and demands altogether.
County Court Summons
A County Court Summons is a legal document issued by a county court in England and Wales, which informs the recipient that they are being sued for an outstanding debt. This document sets out the details of the debt, the claimant’s name and address, and the deadline by which the defendant must respond. If the defendant fails to respond to the summons, the court may enter a judgment in default against them. If the defendant responds to the summons, they may either dispute the debt or agree to pay it.
If the debt is disputed, the court will hold a hearing to determine the outcome of the case. It is important for recipients of a County Court Summons to seek legal advice and respond promptly to the summons, in order to avoid the risk of a default judgment and to ensure that their rights are protected in the legal process.
What actions can be taken?
If you receive a County Court Summons, there are several actions you can take. Firstly, you should seek legal advice as soon as possible, in order to understand your rights and options. You may be able to dispute the debt if you believe it is incorrect, or negotiate a payment plan with the claimant if you agree that the debt is owed.
If you wish to dispute the debt, you will need to complete and return the Response Form included with the summons within the deadline specified in the summons. This will inform the court that you are disputing the debt and trigger a hearing to determine the outcome of the case. If you do not respond to the summons or attend the hearing, the court may enter a judgment in default against you.
It is important to respond promptly to the summons and attend any hearings, in order to ensure that your rights are protected in the legal process. If you are struggling to pay the debt, you may also wish to seek debt advice and support from organizations such as Citizens Advice or a debt charity.
By taking proactive steps to deal with the summons and manage your debt, you can minimize the risk of further legal action and protect your financial stability.
County Court Judgment
A County Court Judgment (CCJ) is a court order issued by a county court in England and Wales, which confirms that a debtor owes a specific amount of money to a creditor. CCJs are issued when a debtor fails to respond to a County Court Summons or fails to pay a debt that has been legally ordered by the court. Once a CCJ has been issued, it will be recorded on the debtor’s credit file for a period of six years, which can negatively impact their credit score and ability to obtain credit.
The creditor can then take further legal action to enforce the CCJ and recover the outstanding debt, such as by instructing bailiffs to seize goods or freezing the debtor’s bank account. It is important for debtors to seek legal advice and respond promptly to any County Court Summons in order to avoid the risk of a CCJ and to protect their credit rating and financial stability.
What actions can be taken?
If a County Court Judgment (CCJ) has been made against you by a court, there are several actions you can take. Firstly, you should check the details of the CCJ to ensure that they are accurate and up-to-date. If there are any errors, you can apply to have the CCJ set aside or varied by the court.
If the CCJ is accurate and you owe the debt, you should make arrangements to pay the outstanding amount as soon as possible. You can contact the creditor to negotiate a payment plan or settlement, or seek advice from a debt charity or other support organization. It is important to pay the debt or make payment arrangements within one month of the CCJ being issued, as failure to do so may result in the CCJ being recorded on your credit file for six years, which can negatively impact your credit score and ability to obtain credit.
If you are unable to pay the debt, you can apply to the court to have the CCJ varied or set aside on the basis of financial hardship. You may need to provide evidence of your financial situation, such as bank statements or proof of income and expenses. The court may then consider reducing the amount owed or allowing you to make reduced payments over a longer period of time.
Read more: Can you sue a company in liquidation?
Enforcement action
Enforcement action can be taken by creditors to recover unpaid debts and County Court Judgments (CCJs). There are several types of enforcement action that can be taken, depending on the circumstances of the case.
One common form of enforcement action is to instruct bailiffs to seize goods or property belonging to the debtor, in order to sell them and recover the debt. Bailiffs have the power to enter your property and seize goods, although they must follow strict legal procedures and provide notice before doing so.
Another form of enforcement action is to apply for a Charging Order, which places a legal charge on the debtor’s property or land. This means that the creditor can recover the debt by forcing the sale of the property, or by waiting until the property is sold and claiming the debt from the proceeds.
A third option is to apply for an Attachment of Earnings Order, which requires the debtor’s employer to deduct payments from their wages and pay them directly to the creditor.
What actions can be taken?
If enforcement action has been taken against you for unpaid debts or County Court Judgments (CCJs), there are several actions you can take. Firstly, you should seek professional advice from a debt charity or other support organization, who can advise you on your rights and options for managing the debt. They may be able to negotiate with the creditor to reduce the debt or arrange a payment plan that is affordable for you.
You may also be able to apply to the court to have the enforcement action suspended or set aside, if there are grounds for doing so. For example, you may be able to argue that the creditor has not followed the correct legal procedures or that the amount claimed is inaccurate.
Statutory Demand
A Statutory Demand is a formal legal demand for payment of a debt, which can be issued by a creditor against a debtor in England and Wales. It is a written document that sets out the amount owed, the basis of the debt, and a deadline for payment. If the debt is not paid within 21 days of the Statutory Demand being issued, the creditor can apply to the court for a Bankruptcy or Winding-Up Petition, which can result in the debtor being declared bankrupt or their company being wound up.
It is important to respond promptly to a Statutory Demand and seek legal advice, as failure to do so can have serious consequences. If you dispute the debt or believe that the Statutory Demand has been issued incorrectly, you can apply to have it set aside or vary it within 18 days of receiving it.
What actions can be taken?
If you receive a Statutory Demand for payment of a debt, there are several actions you can take. Firstly, you should seek professional advice from a debt charity or other support organization, who can advise you on your rights and options for managing the debt. They may be able to negotiate with the creditor to reduce the debt or arrange a payment plan that is affordable for you.
If you dispute the debt or believe that the Statutory Demand has been issued incorrectly, you can apply to have it set aside or vary it within 18 days of receiving it. This will require you to provide evidence to support your case and attend a court hearing, so it is important to seek legal advice and prepare thoroughly.
If you are unable to pay the debt, you may need to consider other options such as bankruptcy or an Individual Voluntary Arrangement (IVA). These are formal insolvency procedures that can help you to manage your debts and may result in some or all of your debts being written off.
Winding Up Petition
Issuing a Winding Up Petition against your business is a serious matter, as it signals the creditor’s intention to pursue the debt through liquidation of the company if the debt is not repaid. The consequences of liquidation can be severe, with the company’s assets being sold to pay off creditors and employees potentially losing their jobs.
If you receive a Winding Up Petition, it is crucial to act quickly and seek professional advice from an insolvency practitioner or lawyer. You may be able to negotiate with the creditor to pay the debt or agree to a payment plan, or seek support from a debt charity or other organization.
If you cannot pay the debt, you may need to consider options such as a Company Voluntary Arrangement (CVA) or administration, which can help to restructure the business and manage its debts. These procedures should only be considered after seeking professional advice and considering all other options.
What actions can be taken?
If your company receives a Winding Up Petition, it is important to act quickly and seek professional advice from an insolvency practitioner or lawyer. You may be able to negotiate with the creditor to pay the debt or agree to a payment plan, or seek support from a debt charity or other organization.
You can also challenge the Winding Up Petition by disputing the debt or showing that it has been issued incorrectly. This may require you to attend a court hearing and provide evidence to support your case, so it is important to seek legal advice and prepare thoroughly.
If your company is unable to pay the debt, you may need to consider options such as a Company Voluntary Arrangement (CVA) or administration, which can help to restructure the business and manage its debts.
If a Winding Up Order is granted, the company will be liquidated and its assets sold to pay off creditors. This can have serious consequences for employees and other stakeholders, so it is important to take prompt action to manage the debt and avoid the risk of liquidation.
Receiving legal action or pressure from creditors?
If you or your business are receiving legal action or pressure from creditors, it can be a stressful and overwhelming experience. However, it is important to remember that there are options available to you and seeking professional advice can help to alleviate some of the pressure.
At our company, we understand the difficulties that can arise from financial difficulties and our team of experts are on hand to provide support and guidance. We can offer advice on negotiating with creditors, managing debts, and exploring formal insolvency procedures if necessary.
Don’t suffer in silence – contact us today via our website to discuss your situation and find out how we can help. Our experienced team will listen to your concerns and provide practical, tailored advice to help you manage your debts and move forward with confidence.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.