Covid19 Debt Collection Case Study

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Director of a company debtor threatens to put the company into liquidation if you don’t agree to £300 a month for a £3,236 CCJ. The same director tells you he can’t afford to settle in one lump sum. What do you do?

Consider this some Insolvency Practitioner’s, (IPs), will charge upwards of £4,500 or more for a Statement of Affairs. We’re dealing with one such liquidation. The director of the company paid the IP £4,500 out of his own pocket overlooking the fact for two years he paid himself a dividend when there was no profit in the company. The director is being investigated for declaring unlawful dividends. Crazy, if the investigation resolves the director declared unlawful dividends the same IP he paid £4,500 for a Statement of Affairs, will demand the director return the dividends.

With the above considered returning to the scenario, when you appreciate how much IPs charge for a Statement of Affairs, is the director of the company debtor having a laugh over £3,236 ?!?!? Even if on the basis as is often the case the company owes the director money and he decides to wind up the company and put it in the hands of the Official Receiver, there’s the deposit of £1,600 and other fees.

What did Master Collections do?

We stood up to him with the following email from our Legal Manager :-

‘If you are contemplating putting the company into liquidation, the cost will be comparable to the CCJ figure of £3,236, on that basis I see no reason why you can’t settle the CCJ in one lump sum to ensure it doesn’t sit on the credit file of the company and prejudice any loan applications.’

Three weeks later the company debtor settled the CCJ in full.

What should you Do?

We’re not encouraging you to be ruthless with your debtors in this crisis after all they are customers too. But some debtors will be opportunists making bald Covid19 statements without any justification against the background of unprecedented Government support. In addition some businesses have never had it so good, business is thriving. The difficulty is telling the difference between the ‘Won’t Pays’ from the ‘Can’t Pays’. The answer, you put them to the test. For example for one client we advised an email is sent to all their customers advising them that all invoices are to be paid within credit terms, however for those that are struggling invite them to complete a Financial Statement to determine their ability to meet their liabilities and assess an appropriate Payment Plan. Alternatively if you wish to be extra friendly rather than invite debtors that need time to pay to complete and return a Financial Statement you can invite them to call you to discuss an appropriate Payment Plan and aim for no more than 3 months. Other clients are agreeing settlements on the basis the debt is settled within 5 days in return for a discount representing the costs of collecting the debt.

If all else fails our clients refer debts to us knowing the debtor has already gone through a level of forbearance, as a result cannot complain when we turn up the heat, and in our experience dishonest debtors cannot stand the heat most certainly where there are no holes in your evidence.

So far among other cases during this crisis to name but a few Master Collections has collected:-

  • £45,000 for a construction firm.
  • £7,308 for a digital and marketing agency.
  • £3,236 for an Electrical Wholesaler and Distributor.

In addition we have agreed and advised on Payment Plans for wholesalers, acquired a joint CCJ against the company debtor and Guarantor for and in favour of a Builders Merchant and managed enforcement of CCJs where Enforcement Officer powers are limited for an Electrical Wholesaler and Distributor.

Want to find out more?

Call award-winning credit professional and commercial lawyer Carlo Pegna today on 01920 481467 to find out what Master Collections can do for your business


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