Debt Recovery during Covid-19

If you are a creditor (business, sole trader or public body) claiming payment of a debt from an individual (including a sole trader) then you are obliged to comply with the Pre-Action Protocol for Debt Claims, which came into force from 1 October 2017.

The global pandemic has caused many business to seek financial aid from the governments various financial relief schemes. However, many businesses will undoubtedly fail and be wound-up following the devastating impact on the economy that Covid-19 has had.

George Osborne, the former Tory chancellor, has argued that the UK government should over time write off billions of pounds of loans to small companies. In doing so, this would help the UK economy recover at a faster rate following the economic downturn triggered by Covid-19. He told the Commons treasury committee:

“There comes a point where it’s for the overall good of the country that you write off some of those debts even if they score as a loss on the government’s balance sheet”

However, if you are owed money by a debtor it is essential that swift action is taken to ensure unpaid debts are paid or secured, which will protect your own business. So what is the next step if you are owed money and what is the protocol that you need to follow?

Do I need to follow the pre-action protocol?

The pre-action protocol does not apply to business to business debts (unless the person who owes money is a sole trader).

You- the creditor- must be a “business” claiming payment of a debt from an individual. “Business” is not defined in the Debt Protocol, therefore a creditor must be advised whether they are considered a business or not- guidance on this point is elaborated upon in Financial Services Authority v Anderson [2010] EWHC 599 (Ch).

What is the debt recovery pre-action protocol?

The pre-action protocol is in essence a rule book that a creditor must follow before a creditor commences debt recovery court action.

The overriding objective in the Civil Procedural Rules (CPR) states that wherever possible, parties in a dispute should endeavour to avoid court proceedings.

Are there sanctions for not complying with the pre-action protocol?

If you as a creditor business is owed money by an individual debtor (for example for unpaid fees), it is recommended that you seek legal advice from specialist debt recovery solicitors. Legal advice is recommended given that failure to follow the specific pre-action steps could lead to the court imposing sanctions on the non-compliant party.

Letter of Claim

Before court proceedings are commenced, a creditor should consider sending a Letter of Claim to the debtor.

The Letter of Claim should contained the following information:

  • the amount of the debt;
  • whether interest or other charges are continuing;
  • where the debt arises from an oral agreement, who made the agreement, what was agreed (including, as far as possible, what words were used) and when and where it was agreed;
  • where the debt arises from a written agreement, the date of the agreement, the parties to it and the fact that a copy of the written agreement can be requested from the creditor;
  • where the debt has been assigned, the details of the original debt and creditor, when it was assigned and to whom;
  • if regular instalments are currently being offered by or on behalf of the debtor, or are being paid, an explanation of why the offer is not acceptable and why a court claim is still being considered;
  • details of how the debt can be paid (for example, the method of and address for payment) and details of how to proceed if the debtor wishes to discuss payment options;
  • the address to which the completed Reply Form should be sent;
  • enclose an up-to-date statement of account for the debt, which should include details of any interest and administrative or other charges added;
  • enclose the most recent statement of account for the debt and state in the Letter of Claim the amount of interest incurred and any administrative or other charges imposed since that statement of account was issued, sufficient to bring it up to date;
  • where no statements have been provided for the debt, state in the Letter of Claim the amount of interest incurred and any administrative or other charges imposed since the debt was incurred;
  • enclose a copy of the Information Sheet and the Reply Form at Annex 1 to the Pre-action Protocol for Debt Claims; and
  • enclose a Financial Statement form (an example Financial Statement is provided in Annex 2 to the Pre-action Protocol for Debt Claims – the Statement is part of the Standard Financial Statement and can be downloaded from

Can I still issue a claim during Covid-19 lockdown?

Yes. Creditors are still able to issue a debt claim via The County Court Money Claims Centre or Money Claims Online. These services usually process a claim within 17 working days.

Once the claim has been issued and served on the debtor, they have 14 days in which to acknowledge the claim or file a defence, which can be extended by a further 14 days (making it 28 days from the date of service) with an acknowledgment of service.

Specialist London Debt Recovery Lawyers

We’re masters of insolvency dispute litigation. We are a specialist City of London law firm made up of Solicitors & Barristers. We’re based in the Middle Temple Inns of Court (next to the Royal Courts of Justice where the High Court and Central London County Courts are based).  We’re experts in dealing with matters surrounding insolvency in particular our team have unparalleled experience at both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules. We provide a quick no cost initial telephone case review to establish whether or not we can help you; just call one of our team on 02071830529.

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