Recovering Debt Accounts

May 31, 2009

Peter runs a successful plumbing supplies business. While the business was going well with new customers being added daily, a tradesman that regularly buys his parts from Peter enquired about opening a credit account.

Peter had known the tradesman for a few years and agreed to open the account without doing any credit checks and without having the tradesman sign a Credit Account application form. The tradesman’s business appeared to be doing well and during the first few months, Peter even had trouble keeping up with all the orders.

Six months later, the situation had deteriorated. The tradesman’s credit account is more than 3 months overdue and equates to more than 30% of Peter’s outstanding debtors. Peter tried to contact the tradesman to make arrangements to reduce the balance of the account, but despite many promises by the tradesman, no further payments were received.

Peter then decided to see the Debt Recovery team at Hutchinson Legal to see what action could be taken to recover the outstanding debt. Peter’s solicitors asked whether he had a signed credit application and whether that application included a charging clause to give Peter some security over the personal assets of the tradesman. Unfortunately, Peter did not. The Debt Recovery team then issued a letter of demand to the tradesman.

After receiving the letter of demand, the tradesman then called Peter and claimed for the first time that the items Peter had been supplying were defective and he would not pay anything for them. Peter was shocked at the tradesman’s attitude after all the support Peter had given him.

Peter then instructed the Hutchinson Legal solicitors to issue Court proceedings. As part of the Court process, a Mediation involving the parties and their solicitors was held. During the Mediation, the Debt Recovery solicitor was able to persuade the tradesman and his solicitors that unless the matter was resolved the tradesman’s legal costs would be substantial if he lost the Court proceedings.

The tradesman soon agreed to pay 90% of the debt. The Hutchinson Legal Debt Recovery solicitor then drew up a terms and conditions of sale document for Peter which included a “Returns Policy” and a charging clause to give Peter some security in the future over the personal assets of his customers that had a credit account.

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