By Samantha Marsden
It is time to say goodbye to the 7 day Letter Before Action (LBA) for unpaid business debts. On 1 October 2017 the new Pre-Action Protocol for Debt Claims came into effect and it now governs the process a business must go through before starting Court proceedings.
Businesses (including sole traders) will no longer be permitted to provide an individual with a 7 day notice threatening Court proceedings if a debt remains unpaid. Under the new regime the most notable change is that a business must now give the debtor 30 days to reply to a LBA. If the debtor does reply or requests further information, the business must also wait a further 30 days before taking the matter to Court.
If the debt is disputed, the parties must make every effort to resolve or narrow the issues in dispute and means of Alternative Dispute Resolution should be considered. If an agreement cannot be reached, the business must then provide the debtor with at least 14 days’ notice before starting Court proceedings.
This new Protocol means that a business can expect to wait at least 60 days in disputed cases, and up to 90 days in some others, before it is able to start Court proceedings to recover the debt.
In addition, the LBA is now subject to strict requirements as to form and content, including specific information which must be provided to the debtor about the money owed and various standard reply forms which the debtor must be asked to complete.
The aim of this new Pre-Action Protocol is to encourage early communication with a view to avoiding Court proceedings, but it is a potential minefield for the unaware and those faced by debtors trying to play the system. Businesses will need to be prepared for those “professional debtors” who try to delay matters for as long as possible, and must make sure they seek advice from the outset to minimise delay.
Full details of the new Protocol can be found on our website: www.twmsolicitors.com/debt-recovery-the-new-preaction-protocol-for-debt-claims/.
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