New Pre-action protocol for debt claims from 1st OctMake Text Bigger
The new protocol is designed to encourage debtor and creditor to communicate and resolve a payment plan before the need to go to court.
Click Here to download the full Pre-Action Protocol for Debt Claims
The following summary is from our partners at the Sheriffs Office:
New process for Creditors:
Creditors will be expected to have sent a clearly dated Letter of Claim by post, and should clearly state the following information:
- The total debt summary
- Whether interest or other charges are being added such as administration fees
- If the debt arises from an oral agreement, who made the agreement, what was agreed, and when and where it was agreed
- If the debt arises from a written agreement, the date of that agreement, the parties to the agreement and enclosing a copy or stating that a copy can be requested from the creditor
- A statement of account for the debt, including the amount of interest and any other charges imposed since the debt was incurred
- Details of how the debt can be paid and what the debtor can do if it wishes to discuss payment options
- If regular instalments are being offered, an explanation of why this isn’t an acceptable arrangement and why court action is being considered.
If the individual debtor has not responded to the Letter of Claim within 30 days of the date of the letter, the creditor may then start court proceedings.
The court will look at the documentation and adherence to this protocol and will consider the non-compliance when giving their directions for the management of proceedings going forward, so this legislation is important for anyone with a business or who is a sole trader doing business with individuals.
If an arrangement is made, but the debtor subsequently defaults, the creditor must start the entire pre-action protocol process again.
Whilst the government is clearly bringing in new legislation to bring about positive changes, there is certainly scope for debtors to use the new pre-action protocol to push their claim right to the time limits, at the various stages, or to use any procedural error by the creditor, however minor, to create further delay.
We are already seeing “advice” in several debt forums on how to delay the process. This will be an inconvenience for large companies, but might have an extremely negative impact on small businesses and sole traders.
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