Changes To Debt Claims – Don’t Get Left Behind

Changes To Debt Claims – Don’t Get Left Behind

On 1 October 2017, the Pre-Action Protocol for Debt Claims (the “Protocol”) will come into force.

The Protocol will apply to any business, including sole traders and public bodies, (the “Creditor”) looking to bring a claim against an individual or a sole trader (the “Debtor”).

It does not apply to:

  1. business to business debts (unless the debtor is a sole trader);
  2. claims where the debt is covered by another Pre-Action Protocol (for instance Mortgage Arrears); and
  3. claims issued by Her Majesty’s Revenue and Customs  (Claims for the Recovery of Taxes and Duties).

The Protocol has four aims:

  1. to encourage early communication between the parties;
  2. to encourage the parties to act in a reasonable and proportionate manner, having regard to the size of the debt;
  3. to enable the parties to achieve settlement without the need for Court proceedings ; and
  4. where  proceedings cannot be avoided, to support the effective management of those proceedings.

The Letter of Claim should include the following:

  1. details of the debt, e.g .the amount; when and how the debt arose; the parties to the debt;
  2. if regular instalments are being made or offered, why the offer is not acceptable;
  3. details of how the debt can be paid; and
  4. an address to which the completed Reply Form can be sent.

The Protocol states that the Letter of Claim should enclose a number of documents including an Information Sheet and Reply Form, together with an up-to-date statement of account.

The Debtor then has 30 days from the date of the Letter of Claim to respond. Should the Debtor fail to respond within this time frame, the Creditor may issue proceedings.

The Debtor should respond to the Letter of Claim using the Reply Form. The Debtor may request copies of any documents from the Creditor, or enclose any documents, he believes may be relevant to the matter. On receipt of the completed Reply Form, the Creditor must wait a further 30 days before commencing  proceedings, or 30 days from when the Creditor provided any requested documents to the Debtor, whichever is later. Documents must be provided within 30 days of a request being made.

If there are still issues in dispute after disclosure has taken place, parties should consider Alternative Dispute Resolution.  Any failure to comply with the Protocol will be taken into consideration by the Court when giving directions for case management and costs.

If the parties have complied with the Protocol but have been unable to settle the dispute, Part 8 of the Protocol encourages parties to review their positions again prior to issuing proceedings.

The Protocol should be a useful tool in providing guidance for parties involved in debt claims. It should assist both creditors and debtors in reaching settlement without the need to commence proceedings and, in turn, help to keep costs down for the parties involved.

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