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New rules for recovering debt from individuals

Posted on August 29th, 2017

CC BY 2.0 Images of Money
Rules for recovering debt from individuals will change at the end of next month.

From 1 October, creditors will have to send debtors something called a Pre-action Protocol, also known as a Letter of Claim.

The document will have to include contractual details, including any verbal agreements, and be sent as a hard copy by post to the debtor who will have just 30 days to respond.

The new rules are intended to speed-up debt recovery and cut the number of cases going to court.

Businesses will be able to use the new protocols against individuals and sole-traders but not business-to-business unless the debtor is a sole-trader.

But making sure the new paperwork contains all the right information could be more complicated than existing recovery procedures, albeit that under current rules the process can take years to resolve.

To help businesses understand the new procedures, the Chamber has joined forces with regional law firm The Smith Partnership to host a breakfast workshop on how to use the new procedures.

Claire Twells, Debt Recovery at Smith Partnership, said: “We welcome improvements to the legal debt recovery process and want business to be aware of the changes now, so accounts teams are prepared before 1 October.

“In most cases, if disputes were cleared up earlier, in a proportionate and professional manner, debts would be paid sooner. This in turn would improve cash flow for businesses.

“One of the fundamental changes to the rules is the removal of the usual seven-day demand letter. A new Letter of Claim is being introduced, which will give the individual 30 days to respond, and will have to include a series of documents to prove the validity of the debt, and all the key documentation of the business transaction.”

Chris Hobson
Chris Hobson, the Chamber’s Director of Policy, said: “Cash flow is a major issue for many small businesses, meaning one bad debt can make the difference between success and failure.

“A lot of work has been done to encourage big businesses to pay their suppliers in a timely fashion so it’s good to see efforts being made to speed-up the process by which businesses can recover debt from individuals without necessarily having to drag the matter through the courts.”

The breakfast workshop will take place from 8am to 9.30am at Derbyshire County Cricket Club, Derby, on 26 September. It is free to Chamber members, £30+VAT for non-members.

For more information and to book places visit