The cost of Debt Recovery

We act for businesses and individuals seeking to recover unpaid debts (“the creditors”) from those owing the debt (“the debtor”) in a variety of matters, from simple undisputed debts to more complex contested debts.

Due to the nature of this type of work where much depends on what’s involved, we cannot provide a fixed fee option. We can and will provide you with an indication of typical fees for the different types of work we carry out in the debt recovery field.

We will charge a time-based fee for this type of work. The level of fee charge will depend on who deals with this work for you. Our current rates per hour for the different categories of fee earner in our firm are as follows:

We will now consider typical costs for different types of cases within the debt recovery area of work.

Undisputed Debts

Usually where a debt is undisputed the easiest way to recover the sums outstanding is to issue a Statutory Demand. A statutory demand is a written demand for payment of a debt served on an individual or a company. An individual or company that owes a debt, that has been due for more than three weeks, and exceeds £750 (for companies), or £5,000 (for individuals), risks having a bankruptcy or winding-up petition issued against it.

The cost of this will vary depending on the sum outstanding. In this example of a typical fee, it relates to a debt lower than £5,000. A typical fee for issuing a statutory demand is £500 (exclusive of VAT). When we add VAT at 20%, the cost of this is £600 (including VAT).

Are there any additional costs involved?

Any additional costs in relation to this type of case tend to be minimal and relate, generally, to search fees. We will advise you of the position as soon as we are aware that there is such a requirement and inform you of the likely costs.

What’s involved in an undisputed debt case?

This type of case is likely to include the following stages:

• An initial consultation.
• Reviewing documentation.
• Provision of written advice.
• Undertaking appropriate searches (additional disbursement fees may apply).
• Sending a letter demanding payment to the other side.
• Receiving payment and sending it onto you, or if the debt is not paid, drafting and issuing a statutory demand.
• If payment is not received within 21 days, providing you with advice on the next steps and the likely costs.

Does this cost include everything?

We have provided a list of the common steps we take in cases of this nature. However, in the event that the debtor should fail to settle the case, further procedure will be required to resolve the situation. Should the debtor decide to defend the claim the case will change from an undefended debt case to a defended debt case. Similarly, in the event that the debtor should fail to pay, then the next stage in this process is likely to be bankruptcy (in the case of individuals and partnerships) or liquidation (in the case of corporate entitles like companies). These actions fall out with the scope of the typical fee for this type of work referred to above. Should such a situation arise, we will advise you of this at the earliest possible opportunity and provide you with information on the likely costs of further action.

Disputed Debts

Where a debt is disputed it is likely that you will require to raise court proceedings to recover the sums due. The cost of each case will depend on the value of the claim, its individual circumstances, and the complexity of the claim.

Again, as in all cases, the circumstances are particular to the case and the costs we now provide are to give you an indication of the possible costs and are not defined or fixed.

A simple debt recovery case

A case such as this is where discussions take place with the defender regarding a consumer matter in order to aid settlement. Settlement may be possible without recourse to court proceedings and without in-depth negotiation. In such a case, a typical fee could be up to £2,000 (exclusive of VAT). When VAT at 20% is added, the cost amounts to £2,400 (including VAT)

Moderately Complex Case

A case such as this is where negotiations do not resolve matter resulting in Simple Procedure (a court procedure used for debts of up to £5,000) being raised. Value of claim of this nature is less than £5,000. This includes assistance throughout the running of the case. In such a case, a typical fee could fall within the range of £2,000 (exclusive of VAT) to £5,000 (exclusive of VAT). When VAT of 20% is added, the typical cost will range between £2,400 (including VAT) and £6,000 (including VAT).

Highly Complex Case

A case such as this is where value of claim more than £5,000 and court action required. This type of court procedure is called an Ordinary Action. It involved presenting detailed information to the court and allows for potentially substantial adjustment to answer any claims the debtor makes. In such a case, a typical fee would likely start at £4,000 (exclusive of VAT) with no upper limit. When VAT of 20% is added, the typical cost would start at £4,800 (including VAT).

Are there any additional costs involved?

When you raise Ordinary Proceedings in the Sheriff Court, a fee needs to be paid. The initial fee for this kind of procedure is £159.

In addition, if service of the application needs to be made by Sheriff Officer, an additional court fee of £13 will need to be paid.

In addition to that, the Sheriff Officers themselves will charge a fee and the level of that fee will be dependent on how easy or difficult it is for them to service the application on your spouse or partner.

For instance, if the application has to be served personally, the Sheriff Officers will charge a fee in the region of £103.78. This fee will attract VAT at 20% which means it will cost £124.54.

What’s involved in an undefended debt recovery action?

The following is an illustration of a typical case. Each case will differ and not all steps in the process may be required. Costs will vary accordingly. Some typical steps in the process will include:

• Initial consultation, considering matters and providing initial advice.
• Entering into discussions with opponent re possible settlement.
• Sending a letter before action where negotiations fail.
• Preparing court action.
• Considering defences or preparing defences where appropriate.
• Considering interlocuters or any other orders issued by court.
• Considering necessary witnesses and taking witness statements.
• Preparing for and attending any hearings fixed other than a full evidential hearing.
• Preparing documents as evidence
• Preparation and attendance at a final hearing.

The stages set out are only an indication of what is required. Additional stages may be required, or some may be missed out. Your fee will be amended to reflect this.

Does this cost include everything?

Factors which can make a case more complex and incur additional costs:

• Defending a case made by a party litigant.
• Any complex preliminary issues.
• The number of witnesses or documents.
• The particular issue in question.
• Whether an expert report is required.
• Making or defending a motion for expenses.
• Considering any additional enforcement procedure.

This is not an exhaustive list and other factors may impact on  the costs.

Whilst court dues will be incurred, we cannot predict the extent of these in advance. Much depends on the progress of the case through court. We will discuss any outlays with you prior to them being incurred. We will expect you to make payment of any outlays upfront.

We would reiterate that these costs will vary depending on the individual circumstances of your case.