What legal action can I take to recover debt?

Blogs 19 Jul 2022

If you’ve lost count of how many reminder letters you’ve sent and phone calls you’ve made to chase late payments, learn more about the legal action you can take to recover debts.

There is undoubtedly a balance to be struck by businesses between maintaining a good relationship with your clients (ensuring long-term income) and receiving prompt payment for the goods and services provided (preserving short-term cash flow). Whilst payment plans and deferred payments will be the right solution for some businesses, for others legal action will be necessary.

Smaller businesses are all too familiar with late payments and missed invoices, which is why we offer the FSB Debt Recovery service, in association with Markel Law.

We’re here to explain what legal action you can take to recover debt, and give you the confidence to take control of your debt.

First steps

Where an invoice is outstanding, the first step you can take is to send a late payment reminder letter to the client, reminding them that payment is due, and requesting that they pay as soon as possible. This can be followed by a more forceful late payment demand letter, requesting payment within a set time period (for example, seven days) and intimating a claim for interest.

If these letters do not prompt a response, you should send a formal letter before action to the client notifying them of an intention to issue Court proceedings to recover the outstanding sum. This will maximise your prospects of recovering your legal costs at the conclusion of the matter. Be aware there are stricter rules governing the amount of information that should be provided to individual debtors (including sole traders) and you will need to give them a slightly longer period of time before issuing a claim.

FSB Debt Recovery offers a free template letter before action on the FSB Legal and Business Hub that you can use. Alternatively, you can instruct a legal expert from Markel Law to write this for you and sent it out on their letterhead for a discounted fee.

What if there’s still no response?

If the debt remains unpaid, there are then two distinct options: Court action or insolvency proceedings. Careful thought should be given before any ‘nuclear’ option is pursued though. For example:

  • a cost-benefit analysis
  • the prospects of ultimately securing payments
  • the impact on the commercial relationship with the client
  • the costs and management time necessary to take matters further

Court action

A claim can be issued at Court against either commercial or individual debtors. A claim form must be filled out, including particulars of claim with details of the debt. These documents are then filed at Court along with an issue fee.

Once a claim has been issued, the Court will serve it on the debtor, who will then be required to acknowledge the claim within 14 days and to respond fully within 28 days. Unless the debtor admits the whole of the claim, a defence must be filed, alongside which the debtor can make a counterclaim. One the claim has been allocated to the apporpriate track, the Court will then provide directions through to trial. 

It’s important to note that if a claim is for less than £10,000, it’s likely to be allocated to the small claims track, where only court fees and limited fixed costs are likely to be recoverable from the debtor even if the claim succeeds. Depending on the track, it will date a minimum of 12 to 18 months from issue of the claim to the final hearing.


If the debtor does not respond to a Court claim and judgment is entered against them, or where a debtor does not make payment after a judgment has been obtained, a business may take enforcement action. It’s important to note that this will involve further costs and does not guarantee a recovery.

Options include:

  • execution against goods owned by the judgment debtor
  • an attachment of earnings order
  • a charging order over a property owned by the debtor

Insolvency proceedings

Alternatively, if a commercial client is unable to pay a debt of more than £750, you can petition the court for a winding-up order. The threat of insolvency often prompts debtors to pay immediately, but if the company goes into liquidation, debtors may be entitled to a dividend.

For individual debtors, if the debt owed is more than £5,000, you can present a bankruptcy petition to the Court. If a bankruptcy order is made, the debtor’s assets can be taken and sold to pay their debts.

Helping small businesses to get the money they're owed

With an easy step-by-step process, as well as downloadable guides, letters and expert advice to support you along the way, we’ve made the process simple. Where litigation does prove necessary, we’ve partnered with Markel Law to provide fixed fee legal advice and support on the full range of debt recovery actions from issuing a claim through to enforcement.

Take back control of your cash flow

It’s time to get the money you’re owed thanks to FSB Debt Recovery. Step-by-step guidance on chasing late payments, 24/7 support, free DIY template letters and clear, discounted legal costs.

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