Recovering debts amid the coronavirus pandemic

July 29, 2020

Allison Thompson, head of debt recovery at Sintons, shares her top tips for collecting debt during unprecedented times

Even before lockdown hit the UK on March 23, the economic conditions had been difficult for some time. Against a backdrop of many months of Brexit negotiations and updates, now we faced yet more challenges for business as countless were forced to scale back or shut down completely.

Chancellor Rishi Sunak announced various steps and measures which have been taken to support and minimise the financial effects of the coronavirus on UK businesses, but despite this, many will undoubtedly face financial hardship and possible collapse.

These are exceptional, unprecedented times and we are frequently asked whether it is appropriate for a business to continue to collect their debts in the ‘normal’ fashion.

It is likely to be the case that some businesses will be unable to repay their debts in full at the moment, but it is vital that companies take the necessary steps to shield their cash flow, sooner rather than later, and businesses should not be discouraged from acting as they usually would.

The global economy has slowed down and we may be heading for an economic recession. Cases of debt recovery may increase, but sadly with that, insolvent debtors will also increase. It  is vitally important to take the necessary steps to get to the front of the queue of creditors.

Here are some of Sintons’ top tips:

Attempt to resolve any disputes as soon as possible: It will save everyone time and money in the long run. There is a chance that your debtor will still have some reserves to pay you now, rather than in a few months.

Demand a written payment plan: Your credit control process is important and especially now during the current coronavirus situation. Ask your debtor to send you a proposal on how they intend to pay. If you then find yourself in the unfortunate position of having to consider using the legal route to recover the debt, it helps to have an acknowledgment of the debt.

Stay in touch: Financial developments in the past few weeks have been so rapid that the creditworthiness of many businesses have completely changed. It is therefore important that you remain in contact with your debtor, and carefully monitor your debtor’s situation on a daily or weekly basis.

Consider demanding additional securities: If your debtor is unable to meet its payment agreement, it is worth investigating whether they can provide you with securities. A guarantee from the director or board of directors, or even
a form of security from a third-party, may be possible.

Force majeure: Your customers may seek to rely on a force majeure clause in the contract to evade payment. Coronavirus is undoubtedly presenting businesses with unique and new challenges, however debtors are not able to rely on a force majeure clause as a matter of right, and it is important that you seek legal advice when confronted with this from your customer.

Sintons
Contact Allison at allison.thompson@sintons.co.uk or 0191 226 3719.
www.sintons.co.uk
@SintonsLaw

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