DEBT COLLECTION FOR SMALL BUSINESSES WHERE DEBT IS UNDER £100,000
At Heringtons we understand how important it is to your small business that the cost of recovering a debt is proportionate to the amount of that debt and the circumstances of the business and the debtor. We offer an initial fixed fee interview for £230 inclusive of VAT. At this meeting we will discuss the evidence, your business situation and the debtor’s ability to pay so that we can advise you on the options available to you and the risks and benefits of those options.
If you decide to proceed then we will provide an estimate based on your particular circumstances. Usually we will send a letter of claim to the debtor. If the debt remains unpaid then we may advise issuing proceedings to obtain an order for payment from the court. The estimates below set out the main stages of the process and assume that the debtor does not dispute the fact that the debt is payable. Where a dispute arises concerning the debt at any stage we will provide you with further information concerning the costs you may face.
We charge for debt collection matters on the basis of time spent and set out below the expected range of costs. The level of costs within the range would also be influenced by the amount of the debt to be collected and the complexity of any contract or invoicing procedure relevant to the repayment of the debt. The hourly rates that apply are:
Position Hourly Rate
Partners £220-£260 + VAT
Solicitors £200-£210 + VAT
Trainees & Paralegals £155-£165 + VAT
Litigation Assistants £140 + VAT
(Please note that the fee within the range will depend on experience.)
Based on the use of a solicitor or partner to provide this service we estimate that the initial steps in the debt collection process will be between £850 and £1,100 plus VAT. These steps include:
1. Reviewing and considering the documents you provide;
2. Investigating the claim including obtaining further evidence and searches where necessary (for example Bankruptcy Searches at £2 per person);
3. Drafting a letter before action, notifying the debtor of your claim; and
4. Receiving payment from the debtor and transferring it to you.
If the debtor makes payment following receipt of the letter before action as indicated we would expect to be able to conclude matters in six to eight weeks at a cost within the above range. If the debtor does not make payment at that stage we would advise you to instruct us to issue proceedings relating to the debt. This stage would be expected to be dealt with over a further six to eight weeks for an additional cost between £350 and £450 plus VAT.
In addition to our fees you would also be required to pay a court fee for the issue of proceedings. These fees are set by a scale based on the value of your claim and you should be aware that the level of interest due may take your claim into a higher band. Court fees range significantly from a fixed figure of £35 for a debt under £300 to 5% of the amount claimed if the debt is between £10,000 and £100,000. As these are subject to change with little notice we would advise you to access the current rates for money claims through the gov.uk website.
Therefore, if the debtor makes payment of the debt in full at this stage the total cost would be expected to fall between £1,250 and £1,550 plus VAT. If the debtor does not respond to the claim then we advise that you instruct us to apply for Judgement in Default. This will take around 4 weeks and would cost approximately £100 plus VAT so we would expect you to pay between £1,350 and £1,650 plus VAT if payment is received following a Default Judgement being made.
If payment is not received within a reasonable period following Judgement we will provide basic advice concerning your options for enforcement which will be charged at no more than £100 plus VAT. The costs to this stage would therefore be expected to amount to between £1,450 and £1,750 plus VAT.
It is not possible to provide a reliable estimate for enforcement action as the potential options are varied; however, we can confirm that this will be charged on a time spent basis based on the hourly rates shown above. We will of course provide you with an estimate of the costs involved in any action we advise based on your particular circumstances so that you can consider this in making your decision.
Please be aware that if your claim is contested at any stage then you will be given an updated estimate as the ranges shown above apply only on the basis that your debtor does not dispute the fact that the debt is due. Costs will be higher if the debtor:
1. has already disputed the debt at the time you instruct us;
2. disputes the debt in response to the letter before action;
3. raises a defence to the issued claim; or
4. challenges a default judgement.
Heringtons is the trading name of Heringtons LLP which is a limited liability partnership registered in England and Wales (registered number OC374843) and which is authorised and regulated by the Solicitors Regulation Authority (registered number 569513). Registered office: Bank Chambers, High Street, Rye. TN31 7JR We use the word “partner” to refer to a member of the LLP and our use of that word does not imply any legal obligation beyond that of a member of the LLP. We use the word “lawyer” to refer to any person providing legal services whether or not he or she is a qualified professional. Our professional indemnity insurers are AmTrust Europe Limited of No 2, Minster Court, Mincing Lane, London EC3R 7BB and the territorial cover of that insurance is worldwide