My Customer is Disputing a Debt: What Can I Do?

If, as a business, you find yourself in a position where one of your customers is disputing a debt owed to you, there are a few steps you can take to try and recover the debt.  

The evidence needed to pursue a claim

Before attempting to recover a business debt from a customer, you must first gather all of the evidence you have which shows that the debt is due and owing.

The easiest way to recover a debt is if you have a written and signed contract with your customer, which clearly shows both parties’ obligations.

For example, that you would supply goods or services to the debtor and what the debtor would pay for those goods or services. 

However, you may have other documentary evidence, such as purchase orders, invoices or written correspondence which is evidence of how the debt has arisen. 

Keeping copies of all correspondence and documents and your attempts to collect the debt or negotiate a settlement is important.

These will be required if your customer continues to dispute the debt and you instruct a solicitor to try and recover it for you. 

If your attempts to resolve the dispute fail, consider instructing a specialist debt recovery solicitor to help you try and recover the debt.

The first step the solicitor will take to try and recover a debt is to send your customer a letter of demand.

The letter of demand must contain the following details:

• The basis on which the claim is made;
• A summary of the facts; 
• The amount of money you are seeking from your customer (including interest and costs where appropriate); and
• Copies of the documents you rely on in support of your debt claim.    

The letter of demand should be posted to your customer, and it can also be sent by email if you have an email address for your customer.

Your customer has to be given a reasonable opportunity to respond to the letter of demand. 

That is normally 14 days in a straightforward case but could be up to 3 months if the debt claim is complicated. 

If, after following the steps above, your customer fails to make payment of the debt, then unless you are prepared to write off the debt, you will likely need to instruct your solicitor to issue Court proceedings to try and recover the debt owing.  

To issue Court proceedings, your solicitor must draft a Claim Form and Particulars of Claim.

These documents need to set out: 

• The names and addresses of the relevant parties (i.e. you and your customer);
• The value of the claim;
• Details as to how the debt has arisen; and
• Any interest and costs which are being claimed. 

A Court fee is payable to issue Court proceedings, and the amount payable depends on the value of the claim.  

Once the Court proceedings have been issued and served on your customer, your customer is given 14 days to respond to the Court proceedings.

The next steps after that will depend on whether your customer responds to the Court proceedings and, if so, whether your customer admits or disputes your debt claim.