While most businesses acknowledge legal debt recovery to be a necessary part of their business, solicitors are often thought of as simply the machinery through which the process is carried out. While it is important your legal team is able to effectively pursue debts, whether or not to pursue them in the first place, and what happens after it has been determined a debt should not be pursued further are important elements in recovering debts.
Deciding Whether to Pursue
Costs in debt recovery matters are variable depending on the circumstances of each case. It is important to consider potential costs before deciding whether or not to pursue a debt with which you are having difficulty. Further, it is critical that debts be assessed and re-assessed during the debt recovery process to ensure you are not “throwing good money after bad”. It is important THAT whoever is handling the debt recovery for your business is mindful of such commercial elements.
It is also critical that you and your legal counsel discuss clearly the issue of costs upon commencing recovery of a debt. An effective manner of limiting your exposure is to set and agree upon a “costs maximum” with your legal advisor. If costs approach this set maximum, you and your legal team can then re-assess your options regarding pursuing the debt.
Closing the File on a Debt – When the End is Not the End
One of the advantages of utilising a solicitor in pursuing a debt is that, even if you decide a debt is not worth chasing beyond entry of judgment, that judgment can have extremely negative effects on an individual’s credit record. That judgment is also enforceable for a period of twelve years.
Even though a debtor may not be in a position to satisfy the debt following entry of judgment, financial circumstances can change substantially over the following months and years. Thus, at any point within the twelve year time frame, you may re-commence pursuing the debt plus scale costs and interest at the Court prescribed rate which is generally higher than the banks indicator lending rate. With no need to go to the trouble of re-stating the facts which gave rise to the debt, or re-filing and re-serving a Statement of Claim. Also, whilst you may have discontinued pursuing the debt, the judgment’s effect on an individual’s credit records may prompt them to settle the debt at a later time of their own accord, converting a bad debt to a recovered debt without any further costs incurred by you or your business.
Contact us to find out more or to arrange a consultation with our debt recovery team in Sydney.