What action could you face from a creditor?
Dealing with creditor pressure is not an uncommon problem for many company directors. It can however, be worrying and distracting. It’s easy to find yourself spending too much time ‘fire-fighting’. However, if you’re experiencing pressure from your creditors, it’s vital that you make dealing with it a priority to protect both your business and your creditor relationships. Here we discuss the action that creditors can legally take against your business, your rights against creditors, and your options for dealing with creditor pressure.
What action can my creditors legally take ?
To put it simply, creditors will not go away and should the need arise, there are various tools they can use against you to recover the monies owing to them. You need to be aware of what they can do, and particularly what the consequences of each action could be for your business.
First steps
The most common tools that creditors use in the first instance might be:
- Charging interest on late payments
- Selling debts onto a third party agency (or debt purchaser), which can be more difficult to negotiate with than suppliers
- Engaging debt collection agencies to recover the debt. (Be aware that debt collectors are not bailiffs or enforcement officers and therefore do not share the same rights: essentially, debt collectors have the same civil rights as creditors)
What are my rights against creditors?
Creditors have the right to demand payment from you for the money they are owed, but there are limits to what this means:
- They are not allowed to harass or intimidate you. You have a duty to keep them informed of your situation, however they shouldn’t contact you excessively, at unsociable hours, or make threats against you. Nor should they try to involve family members, or your neighbours etc.
- They can only follow legal procedures, such as obtaining court judgments against you, or making a statutory demand for payment (see below)
- They cannot demand that you make larger repayments than the amount you actually owe. Creditors are allowed to place additional interest on your original debt but this must follow the terms and conditions laid out in your agreement
Second steps: what legal action could creditors use against me?
When creditors want to show a more serious statement of intent, the legal options open to them are:
- County Court Judgments
- Statutory Demands
- Notice of Enforcement and Bailiff action
- Winding-up Petitions
Follow the links for more information on each.
What can you do?
Dealing with creditors and collection agencies can be a burden and sometimes difficult, but to avoid more serious implications for your business, you need to keep on top of it. It’s simple, but honest and regular communication with your creditors is key.
If you are worried about deeper financial issues, or tell tale signs as to whether your business is in trouble, there are a range of solutions that we can discuss with you to help ease pressure or to restructure your business.
Have a look at these helpful topics:
Or for more tailored advice, contact one of our business rescue experts directly.