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Can't pay, won't pay

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If a client of yours is refusing to pay an outstanding bill, the financial implications to your business are obvious, but there’s also the cost of spending time attempting to recover the debt, as well as disruption to any future engagement or projects. If you are owed money for any unpaid invoice(s), whether they are for a product, service or maybe rent arrears, you are entitled to claim this back. Here Brian Kirby, Commercial Litigation Associate, advises on the best course of action to take in relation to dealing with clients such as these.

Knowing your Debtor 

It is important to first gather some information about the person/company who owes you money. If the debtor is an individual, it may be worth conducting a search against them in order to establish whether they have County Court Judgments (CCJs) registered against them already and/or if they have been made bankrupt.

If your debtor is a company, you can conduct a company search which will also show any CCJs and the state of the company’s liquidity. It is important to assess the debtor’s financial situation in order to establish the best way to pursue recovering the debt.

Knowing your Options 

After assessing the financial status of the debtor, a choice will need to be made as to what is the appropriate action.

The traditional route would be to issue a claim against the debtor in order to obtain a CCJ. This would ensure that your debt is registered against them for a period of 6 years. The debtor can apply to have this removed if the debt is paid off within a certain number of days, as ordered by the court.

The debtor may already have a number of CCJs registered against them. It may therefore be more worthwhile for you to commence insolvency/bankruptcy proceedings against them. This will result in their assets being divided between all creditors listed against them.

If it is the case that the debtor is already bankrupt/insolvent, you may wish to list yourself as a creditor. Useful information can be found at

Before bankruptcy or insolvency proceedings are commenced, a statutory demand should be served on the debtor. This warns them that they must pay/set up a payment plan within 21 days of receiving the demand or you will be applying to have them declared insolvent. You should not serve a statutory demand if the debt is in dispute. In these circumstances, the debtor could apply to have the statutory demand set aside (if the debtor is an individual) or apply for an injunction to prevent you from issuing a winding up petition (if the debtor is a company). Dealing with either of those applications is likely to cost a large amount in legal fees, potentially more than the debt itself. If you are therefore in any doubt, you should seek a CCJ first.

Commercial landlords may also have the option of seizing the tenant’s goods if rent is not paid. This is known as Commercial Rent Arrears Recovery and the rules are set out in the Tribunals, Courts and Enforcement Act 2007. This route is limited to particular circumstances, so legal advice should be sought before pursuing this option.

Taking the Necessary Steps 

Insolvency/bankruptcy proceedings are governed by the Insolvency Act 1986 and the Practice Direction for Insolvency Proceedings offers further guidance as to how to begin these proceedings.

Before issuing a claim, you should take the Practice Direction for Pre-Action Conduct into account. It is a requirement that the spirit of the Practice Direction is considered in claims such as these, and careful consideration should be made in relation to pre-action correspondence.

We would always advise that legal guidance is sought before making any approaches to your client. To discuss your options or any other questions with us, you can contact Brian Kirby in our Debt Recovery team on 02380 717421 or visit their section of the website here.


This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.