Threat of insolvency offers fast debt recovery

As the cost of County Court action soars, credit management and debt collection company Daniels Silverman is advising small to medium sized enterprises (SMEs) to consider threatening insolvency as a means to recover debt. Daniels Silverman achieved a 90% resolution rate on behalf SMEs, between 2008 and 2010, in cases where Statutory Demands or 72 […]

As the cost of County Court action soars, credit management and debt collection company Daniels Silverman is advising small to medium sized enterprises (SMEs) to consider threatening insolvency as a means to recover debt.

Daniels Silverman achieved a 90% resolution rate on behalf SMEs, between 2008 and 2010, in cases where Statutory Demands or 72 hour Winding Up Insolvency Notices were used.

• Daniels Silverman collected over £6.5 million debt on behalf of SMEs using Statutory Demands/Insolvency Notices between 2008 and 2010

• Insolvency Notices were four times more effective than issuing action through the County Court

Carole Hughes, managing director, Daniels Silverman, says: “SMEs are not aware and are not making use of these legal remedies, which can be issued under the Insolvency Act 1986 for undisputed debts over £750 in value.

“Debtors are keen to settle to avoid formal insolvency proceedings when personally served with a Statutory Demand. In addition the majority of limited companies served with a formal Insolvency Notice, pay within the 72 hour timeframe.

“In contrast, the County Courts have become ineffective for debt enforcement. Her Majesty’s courts’ fees for civil proceedings increased across the board from 4 April and with small claims hearings (under £5,000) taking an average of 31 weeks, court action is a long and costly process. Many debtors are no longer afraid of County Court Judgments being registered against them. Even when a creditor is awarded judgment in their favour, it can be difficult to recover the money owed.

“We use mediation to resolve the majority of disputes, however if further action is necessary we can advise on the correct wording of Insolvency Notices and Statutory Demands and serve them on behalf of SMEs – this is faster, cheaper and more effective than court action.”

Under the Insolvency Act SMEs can serve a 72 hour Insolvency Notice on debtors who are limited companies, and if they are unable to pay during this timeframe, the creditor is entitled to present a formal winding up petition to effectively close the company down.

In respect of non limited partnerships and sole proprietors, if they fail to make payment 21 days after the date a Statutory Demand has personally been served on them, the SME may make the sole proprietor/partners in the business personally bankrupt.