Legal action should be a last resort to recover debts and you should explore all other options first:

• Take all other reasonable steps, including communicating with the customer - see ensure customers pay you on time.
• Consider some form of alternative dispute resolution (ADR).
• Consider taking back your goods and services, if appropriate.

Mediation is a way of resolving disputes without the need to go to court. It involves using an independent third party - a mediator - who helps both sides come to an agreement.

Negotiation is when the people involved in the dispute - or their representatives, such as solicitors - discuss the issue until they reach an agreement that is acceptable to both sides.

Arbitration involves an independent third party deciding what should happen based on evidence given to them about the dispute. 

Early neutral evaluation (ENE) is when people involved in a dispute send evidence to an independent third person who gives their opinion on the dispute.

If making a claim seems the only answer, you should consider your chances of winning. If your claim is disputed it could be difficult to prove the customer is at fault. You will need to provide as much evidence as you can of the validity of your claim, such as purchase orders or invoices, and copies of reminder letters.

The Advice Services Alliance provides further information on ADR.

Make sure the customer can pay

If the person or business you're taking action against has no assets or has a history of bad debt then you can't be certain of receiving all of the money owed.

Credit reference agencies can provide credit reports on businesses as well as on individual consumers. You will need to have some information ready, such as:

• the name of the business or person you want to get a credit report for
• the last known address
• why you want the credit report

You can check a company's bankruptcy status and outstanding debts with the NI Courts and Tribunals Service.

If you win your claim, the customer is required to pay the sum claimed.

Be prepared for the costs

You will have to pay court fees in advance. However, they may be recovered from the defendant if you win. Note that:

• court fees are payable when you issue a claim and at different stages of the claim, including if you have to enforce the judgment
• if you lose, or do not succeed in enforcing your judgment, you will not be able to reclaim the court fees
• if you win and succeed in enforcing the judgment, you may be able to claim your solicitor's fees and other costs back from the defendant, so long as they are outlined on the court order
• if you refuse to consider alternative ways of sorting out your claim before taking court action, you may not be able to claim your costs back and the court may order you to pay your customer's court costs, even if you win the case
• you can check the current court fees
• you may be able to receive assistance with court fees

The courts each have a different claim limit.

• Small claims courts - for simple cases up to £5,000. For example consumer claims, faulty goods, goods not supplied, goods recovery, debt, breach of contract etc.
• County court - for cases from £5,000 to £30,000.
• High Court - for complex cases and all cases over £30,000.

Even once a claim has been issued it is not too late to sort out the dispute with the customer through some form of alternative dispute resolution and so avoid further court action.

The final warning letter

Whichever course of legal action you choose, you must send a final warning letter to the customer before you begin. You should do this because:

• it often prompts payment
• the courts may penalise you on costs if one is not sent

It is advisable to send the letter using a signed-for delivery service so that the customer can't deny receiving it.

Online claims

If your claim is for a fixed amount that is below £5,000, you may be able to start a claim using the NI Courts and Tribunals Service's small claims online service.

If your case is straightforward, you could prepare the claim, present the case and handle the enforcement on your own. Most people choose not to use solicitors in debt recovery.

But there may be times when you decide you want to seek advice from a solicitor. You should note that:

• legal aid is not usually available for debt recovery
• legal costs aren't normally recoverable

If your claim is likely to be disputed, if your claim is for a large amount or if the case is complicated, it is probably sensible to get professional help from a solicitor or debt recovery agent. 

Choosing a solicitor

Finding a solicitor can be a challenge, and often a personal recommendation is a good way to choose. Before you make a decision, ask the following questions:

• Is there a department specialising in debt recovery?
• Does the firm have a mediator or dispute resolution service that you can consider as an alternative option?
• How will you be charged - rate per hour plus expenses or a percentage of the sum recovered?
• If they do business on a 'no win, no fee' basis, are there any hidden costs? Will you have to pay court costs?

See choose a solicitor for your business.

Debt recovery agents

Other organisations working in debt collection are debt recovery agents and credit agents.

Debt recovery agents employ solicitors and take legal action to recover your money. The Credit Services Association (CSA) provides a directory of debt recovery agents.

Some credit agencies, though not all, will take over the collection of debt. If successful, you will receive an agreed proportion of the total amount owing, while the agency will keep the rest. They usually try to recover debt by:

• sending out routine letters
• telephoning customers

If your claim is for a fixed amount that is below £5,000, you can issue your claim in a small claims court. To do this you need to complete a small claims application form and return it to the court. You can complete your small claims application online with the NI Courts and Tribunals Service.

Completing the form

• Complete the form carefully.  For more information, download the NI Courts and Tribunals Service small claims user guide (PDF, 1MB).
• You are entitled to add the court fee and interest to the amount you are claiming. If a solicitor prepares the claim, other charges may apply that you can also add to the claim.
• The claim form must be signed by you or by someone authorised to sign for you.

Issuing the claim

• You can send or take the claim to any courthouse in Northern Ireland. If the claim is defended, the case will be transferred to the defendant's local court.
• You should supply three copies of the claim form to the issuing court. If there are additional defendants you should send a form for each one.
• You will have to pay the court fee up front.
• Court staff will check that everything is in order, however they are not legally trained and will not be able to provide legal advice. If it is in order, the claim will be given a claim number and served.

The NI Courts and Tribunals Service provide contact details for all NI courts.

You should gather any key documents supporting your case, such as invoices or a delivery sheet signed by your customer. You may have to submit copies of these to the defendant and to the court.

The defendant is allowed 14 days from the deemed date of service of the claim to reply to the claim. However, if the defendant acknowledges service of the claim they can have an extra 14 days. The maximum is 28 days.

On receipt of the court claim the defendant may:

• do nothing
• pay the amount claimed
• admit the claim and make a written application about payment
• acknowledge service and have a 14 day extension to file a defence
• admit the claim and attend court to make an application about payment
• defend part of the claim, admit part of the claim and pay the admitted part
• defend part of the claim, admit part of the claim and ask for time to pay the admitted part
• issue a counterclaim

If the defendant chooses to defend the claim the defence will be sent to you along with an allocation questionnaire for you to complete. You will usually be given 14 days to return the questionnaire.

Be aware that the defendant may file a counterclaim against you. If they do, you will be able to file a defence to the counterclaim and submit it to the court at the same time as returning the allocation questionnaire. See what happens if your debt claim is contested.

Sometimes the judge may deal with the case without a hearing, using written evidence. For example, if you have no chance of successfully winning the claim, or there are no reasonable grounds for you bringing the claim, it may be dismissed without a hearing.

What to do if no defence is entered

If the debtor does not defend the case, you can apply for a judgment from the court at the end of the permitted time. If you issued the claim online you will be able to enter a judgment online. Usually there will be no hearing and a judgment will be made in your favour.

If a defence is entered, the case may progress to a hearing or trial at the defendant's local court. Unless an agreement is reached first a judge will decide the case.

Even if you have started court action, it is not too late to try to reach an agreement with the defendant through some form of alternative dispute resolution.

If you agree to mediate with the other party and it doesn't work, you can still continue with court action.

The small claims court

This is a formal hearing and is usually held quickly (since the Covid-19 pandemic some cases are held remotely via sight link). In a small claims case:

• Evidence is not normally given under oath.
• The claimant and defendant are expected to represent themselves. You can be represented if you wish, but will not be awarded costs for this.
• You may be able to claim limited costs for loss of earnings while attending court, travelling and overnight expenses, and the costs of any witnesses and experts - such as a doctor or surveyor.
• The judge may intervene more than in the other courts as the claimant and defendant are probably not skilled at presenting a case.
• At the end of the hearing the judge tells you their decision and briefly explains the reasons behind it.
• After the hearing both you and the defendant will be sent a copy of the judgment.

View a list of small claims forms available to download from the NI Courts and Tribunals Service.

County court and high court

Taking a case to the county court or to the high court will be a longer process:

• Procedures are much more formal and the case will normally go to trial in court.
• The claimant and defendant are not expected to represent themselves. The preparation of the case can be complex and there may be witnesses or experts with knowledge of particular aspects of the case called to give evidence. 
• Costs are usually awarded, including court fees and legal costs.

You have the right to ask your customer to pay interest under three circumstances. Only one sort of interest can be applied at any one time.

Interest permitted by a contract

Interest written into the contract takes precedence over other forms of interest. However, it must amount to a 'substantial remedy'. In other words it should cover the cost of late payment or deter late payment and should be a fair alternative to statutory interest.

Interest claimed on an issued claim form

This is simple interest only and is at a flat rate of 8% unless the court orders a different rate. It only applies if the case is won or is undefended.

The interest runs from when payment was due until judgment is given by the court. If payment is made before judgment, interest stops at that date. In some circumstances interest can be charged after judgment.

Statutory interest on commercial debts

Statutory interest can be claimed under the Late Payment of Commercial Debts (Interest) Act 1998. In some circumstances costs of up to £100 can also be claimed.

• The rate of interest is 8% over the Bank of England reference rate - the base rates are set on 30 June and 31 December.
• Statutory interest does not apply when you sell to the public. Both seller and buyer must be acting in a commercial capacity.
• For contracts made since 7 August 2002, all businesses and the public sector can claim against all businesses and the public sector.
• Statutory interest can be claimed after late payment has been received. The limit is six years in Northern Ireland.
• The interest usually runs from 30 days after it was due and claimed. A contract or custom and practice may change this, but only if it gives a substantial remedy.
• A contract can't exclude statutory interest, but it is not compulsory to claim it.

Late payment legislation guidance.

The Enforcement of Judgments Office (EJO) is a branch within the Northern Ireland Courts and Tribunals Service and is responsible for the recovery of money, goods and property, where the court has ordered its recovery.

Register of Judgments

The EJO maintains a Register of Judgments, sometimes known as the EJO Debt Register. It records all court orders that have been sent to EJO for recovery action in the previous six years.  

It also provides information about those court orders, if the court order relates to recovery of money and whether or not the amount has been paid in full.

Find out more about the EJO Debt Register.

When may the EJO be used?

A creditor (the person owed money or wants to recovery goods or property) can make a claim against a debtor (the person who owes the money, or is in possession of the goods or property) in court. A Court Judgment may then be made giving details of what is owed or to be recovered and to whom. If the debt is not paid, or the goods or property returned, the creditor may instruct EJO to enforce their court order on their behalf.

Creditors must make an application to have their court order enforced using the appropriate application forms. The creditor must pay an upfront fee to the EJO but ultimately it will be added to the debt which the debtor must pay back.

The EJO provides some help and advice documents.

How to address matters before the EJO become involved

If a court order is made stating you should return goods or property, you should immediately contact the creditor to arrange the return of the goods or property named on the court order.

If the court order is in respect of money, you should contact the creditor and make an offer to repay the debt in full or try to arrange to pay it by instalments.

How does the EJO recover debts?

Most suppliers, investors and staff try to get their money by issuing a claim. But you can issue a winding up (company) petition or a bankruptcy (individual) petition instead.

Winding up and bankruptcy are also ways of enforcing a judgment after a claim has been won, in an effort to actually get your money.

Bankruptcy and winding up procedures should not be used as a means to collect debts. They should only be used when the creditor believes the debtor cannot pay his / her debts.

After making a bankruptcy / winding up order, the Court usually appoints the Official Receiver or Trustee to be receiver and manager of the bankrupt's affairs.

The Official Receiver / Trustee has responsibility from the date of the bankruptcy / winding up for administering and protecting the bankrupt's assets. They must also arrange to pay off outstanding debts.

Creditors may sometimes receive payment of their debt, but more usually they will receive a percentage of what is owed to them.

Debts will be paid in the following order of priority:

• secured creditors - fees and charges of liquidation/bankruptcy
• floating charge holders - companies only
• preferential debtors, including unpaid wages to employees
• unsecured creditors, including HM Revenue & Customs
• interest payable on debts
• shareholders - companies only

How winding up works

• It applies to a company rather than an individual.
• After the winding up the company ceases to exist.
• If the company is insolvent at the time, not all the creditors get paid in full.
• Rules apply and each creditor gets a percentage of what they are owed.

For more information on winding up, see company liquidation.

Bankruptcy applies to a person or a general partnership. If it is a general partnership, all the partners are made bankrupt.  The assets are sold and the proceeds are paid to the unpaid creditors.

Find further guidance on bankruptcy.

The threat and how it works

Often the mere threat of winding up or bankruptcy is very effective. But if the customer still refuses to pay, you might consider the following steps:

• A statutory demand, from a legal stationer or solicitor, or downloadable, can be prepared and issued by the creditor without necessarily using a solicitor to complete the paperwork for you.
• The demand must be delivered to the customer, preferably by hand or by post, using the special delivery or registered mail services. In the case of a registered company, the statutory demand should be served at the registered office.
• On receipt, the customer has a fixed number of days to pay or respond.
• If they do not do so, you can issue a winding up (company) or bankruptcy (individual) petition.
• If you follow all the procedures correctly, and the court finds in your favour, the customer will be wound up or made bankrupt. However, just because you issue the petition does not mean you get priority over whatever money becomes available.

The law assumes that a statutory demand merely paves the way for a petition. But it can be a very powerful debt collecting device in its own right, without the need to proceed to a petition. If the demand results in the issue of a petition (not an order for winding up) it may be publicised on the internet. This means that small businesses have an effective debt collection tool against customers of all sizes.

You should seek legal advice before you act, and you should only act if the money is definitely owing.

As a last resort, if the amount you're owed is more than £750, you can apply to make an individual debtor bankrupt, or issue insolvency proceedings if the debtor is a limited company. Such proceedings can be costly.

Appointing a liquidator or trustee

Where a company is put into liquidation or a person is made bankrupt, you may have to appoint a licensed liquidator or trustee in bankruptcy.

Insolvency practitioners charge fees to the money recovered and you may have to guarantee these fees if the money recovered is not enough.

Legal action should be a last resort to recover debts and you should explore all other options first:

• Take all other reasonable steps, including communicating with the customer - see ensure customers pay you on time.
• Consider some form of alternative dispute resolution (ADR).
• Consider taking back your goods and services, if appropriate.

Mediation is a way of resolving disputes without the need to go to court. It involves using an independent third party - a mediator - who helps both sides come to an agreement.

Negotiation is when the people involved in the dispute - or their representatives, such as solicitors - discuss the issue until they reach an agreement that is acceptable to both sides.

Arbitration involves an independent third party deciding what should happen based on evidence given to them about the dispute. 

Early neutral evaluation (ENE) is when people involved in a dispute send evidence to an independent third person who gives their opinion on the dispute.

If making a claim seems the only answer, you should consider your chances of winning. If your claim is disputed it could be difficult to prove the customer is at fault. You will need to provide as much evidence as you can of the validity of your claim, such as purchase orders or invoices, and copies of reminder letters.

The Advice Services Alliance provides further information on ADR.

Make sure the customer can pay

If the person or business you're taking action against has no assets or has a history of bad debt then you can't be certain of receiving all of the money owed.

Credit reference agencies can provide credit reports on businesses as well as on individual consumers. You will need to have some information ready, such as:

• the name of the business or person you want to get a credit report for
• the last known address
• why you want the credit report

You can check a company's bankruptcy status and outstanding debts with the NI Courts and Tribunals Service.

If you win your claim, the customer is required to pay the sum claimed.

Be prepared for the costs

You will have to pay court fees in advance. However, they may be recovered from the defendant if you win. Note that:

• court fees are payable when you issue a claim and at different stages of the claim, including if you have to enforce the judgment
• if you lose, or do not succeed in enforcing your judgment, you will not be able to reclaim the court fees
• if you win and succeed in enforcing the judgment, you may be able to claim your solicitor's fees and other costs back from the defendant, so long as they are outlined on the court order
• if you refuse to consider alternative ways of sorting out your claim before taking court action, you may not be able to claim your costs back and the court may order you to pay your customer's court costs, even if you win the case
• you can check the current court fees
• you may be able to receive assistance with court fees

The courts each have a different claim limit.

• Small claims courts - for simple cases up to £5,000. For example consumer claims, faulty goods, goods not supplied, goods recovery, debt, breach of contract etc.
• County court - for cases from £5,000 to £30,000.
• High Court - for complex cases and all cases over £30,000.

Even once a claim has been issued it is not too late to sort out the dispute with the customer through some form of alternative dispute resolution and so avoid further court action.

The final warning letter

Whichever course of legal action you choose, you must send a final warning letter to the customer before you begin. You should do this because:

• it often prompts payment
• the courts may penalise you on costs if one is not sent

It is advisable to send the letter using a signed-for delivery service so that the customer can't deny receiving it.

Online claims

If your claim is for a fixed amount that is below £5,000, you may be able to start a claim using the NI Courts and Tribunals Service's small claims online service.

If your case is straightforward, you could prepare the claim, present the case and handle the enforcement on your own. Most people choose not to use solicitors in debt recovery.

But there may be times when you decide you want to seek advice from a solicitor. You should note that:

• legal aid is not usually available for debt recovery
• legal costs aren't normally recoverable

If your claim is likely to be disputed, if your claim is for a large amount or if the case is complicated, it is probably sensible to get professional help from a solicitor or debt recovery agent. 

Choosing a solicitor

Finding a solicitor can be a challenge, and often a personal recommendation is a good way to choose. Before you make a decision, ask the following questions:

• Is there a department specialising in debt recovery?
• Does the firm have a mediator or dispute resolution service that you can consider as an alternative option?
• How will you be charged - rate per hour plus expenses or a percentage of the sum recovered?
• If they do business on a 'no win, no fee' basis, are there any hidden costs? Will you have to pay court costs?

See choose a solicitor for your business.

Debt recovery agents

Other organisations working in debt collection are debt recovery agents and credit agents.

Debt recovery agents employ solicitors and take legal action to recover your money. The Credit Services Association (CSA) provides a directory of debt recovery agents.

Some credit agencies, though not all, will take over the collection of debt. If successful, you will receive an agreed proportion of the total amount owing, while the agency will keep the rest. They usually try to recover debt by:

• sending out routine letters
• telephoning customers

If your claim is for a fixed amount that is below £5,000, you can issue your claim in a small claims court. To do this you need to complete a small claims application form and return it to the court. You can complete your small claims application online with the NI Courts and Tribunals Service.

Completing the form

• Complete the form carefully.  For more information, download the NI Courts and Tribunals Service small claims user guide (PDF, 1MB).
• You are entitled to add the court fee and interest to the amount you are claiming. If a solicitor prepares the claim, other charges may apply that you can also add to the claim.
• The claim form must be signed by you or by someone authorised to sign for you.

Issuing the claim

• You can send or take the claim to any courthouse in Northern Ireland. If the claim is defended, the case will be transferred to the defendant's local court.
• You should supply three copies of the claim form to the issuing court. If there are additional defendants you should send a form for each one.
• You will have to pay the court fee up front.
• Court staff will check that everything is in order, however they are not legally trained and will not be able to provide legal advice. If it is in order, the claim will be given a claim number and served.

The NI Courts and Tribunals Service provide contact details for all NI courts.

You should gather any key documents supporting your case, such as invoices or a delivery sheet signed by your customer. You may have to submit copies of these to the defendant and to the court.

The defendant is allowed 14 days from the deemed date of service of the claim to reply to the claim. However, if the defendant acknowledges service of the claim they can have an extra 14 days. The maximum is 28 days.

On receipt of the court claim the defendant may:

• do nothing
• pay the amount claimed
• admit the claim and make a written application about payment
• acknowledge service and have a 14 day extension to file a defence
• admit the claim and attend court to make an application about payment
• defend part of the claim, admit part of the claim and pay the admitted part
• defend part of the claim, admit part of the claim and ask for time to pay the admitted part
• issue a counterclaim

If the defendant chooses to defend the claim the defence will be sent to you along with an allocation questionnaire for you to complete. You will usually be given 14 days to return the questionnaire.

Be aware that the defendant may file a counterclaim against you. If they do, you will be able to file a defence to the counterclaim and submit it to the court at the same time as returning the allocation questionnaire. See what happens if your debt claim is contested.

Sometimes the judge may deal with the case without a hearing, using written evidence. For example, if you have no chance of successfully winning the claim, or there are no reasonable grounds for you bringing the claim, it may be dismissed without a hearing.

What to do if no defence is entered

If the debtor does not defend the case, you can apply for a judgment from the court at the end of the permitted time. If you issued the claim online you will be able to enter a judgment online. Usually there will be no hearing and a judgment will be made in your favour.

If a defence is entered, the case may progress to a hearing or trial at the defendant's local court. Unless an agreement is reached first a judge will decide the case.

Even if you have started court action, it is not too late to try to reach an agreement with the defendant through some form of alternative dispute resolution.

If you agree to mediate with the other party and it doesn't work, you can still continue with court action.

The small claims court

This is a formal hearing and is usually held quickly (since the Covid-19 pandemic some cases are held remotely via sight link). In a small claims case:

• Evidence is not normally given under oath.
• The claimant and defendant are expected to represent themselves. You can be represented if you wish, but will not be awarded costs for this.
• You may be able to claim limited costs for loss of earnings while attending court, travelling and overnight expenses, and the costs of any witnesses and experts - such as a doctor or surveyor.
• The judge may intervene more than in the other courts as the claimant and defendant are probably not skilled at presenting a case.
• At the end of the hearing the judge tells you their decision and briefly explains the reasons behind it.
• After the hearing both you and the defendant will be sent a copy of the judgment.

View a list of small claims forms available to download from the NI Courts and Tribunals Service.

County court and high court

Taking a case to the county court or to the high court will be a longer process:

• Procedures are much more formal and the case will normally go to trial in court.
• The claimant and defendant are not expected to represent themselves. The preparation of the case can be complex and there may be witnesses or experts with knowledge of particular aspects of the case called to give evidence. 
• Costs are usually awarded, including court fees and legal costs.

You have the right to ask your customer to pay interest under three circumstances. Only one sort of interest can be applied at any one time.

Interest permitted by a contract

Interest written into the contract takes precedence over other forms of interest. However, it must amount to a 'substantial remedy'. In other words it should cover the cost of late payment or deter late payment and should be a fair alternative to statutory interest.

Interest claimed on an issued claim form

This is simple interest only and is at a flat rate of 8% unless the court orders a different rate. It only applies if the case is won or is undefended.

The interest runs from when payment was due until judgment is given by the court. If payment is made before judgment, interest stops at that date. In some circumstances interest can be charged after judgment.

Statutory interest on commercial debts

Statutory interest can be claimed under the Late Payment of Commercial Debts (Interest) Act 1998. In some circumstances costs of up to £100 can also be claimed.

• The rate of interest is 8% over the Bank of England reference rate - the base rates are set on 30 June and 31 December.
• Statutory interest does not apply when you sell to the public. Both seller and buyer must be acting in a commercial capacity.
• For contracts made since 7 August 2002, all businesses and the public sector can claim against all businesses and the public sector.
• Statutory interest can be claimed after late payment has been received. The limit is six years in Northern Ireland.
• The interest usually runs from 30 days after it was due and claimed. A contract or custom and practice may change this, but only if it gives a substantial remedy.
• A contract can't exclude statutory interest, but it is not compulsory to claim it.

Late payment legislation guidance.

The Enforcement of Judgments Office (EJO) is a branch within the Northern Ireland Courts and Tribunals Service and is responsible for the recovery of money, goods and property, where the court has ordered its recovery.

Register of Judgments

The EJO maintains a Register of Judgments, sometimes known as the EJO Debt Register. It records all court orders that have been sent to EJO for recovery action in the previous six years.  

It also provides information about those court orders, if the court order relates to recovery of money and whether or not the amount has been paid in full.

Find out more about the EJO Debt Register.

When may the EJO be used?

A creditor (the person owed money or wants to recovery goods or property) can make a claim against a debtor (the person who owes the money, or is in possession of the goods or property) in court. A Court Judgment may then be made giving details of what is owed or to be recovered and to whom. If the debt is not paid, or the goods or property returned, the creditor may instruct EJO to enforce their court order on their behalf.

Creditors must make an application to have their court order enforced using the appropriate application forms. The creditor must pay an upfront fee to the EJO but ultimately it will be added to the debt which the debtor must pay back.

The EJO provides some help and advice documents.

How to address matters before the EJO become involved

If a court order is made stating you should return goods or property, you should immediately contact the creditor to arrange the return of the goods or property named on the court order.

If the court order is in respect of money, you should contact the creditor and make an offer to repay the debt in full or try to arrange to pay it by instalments.

How does the EJO recover debts?

Most suppliers, investors and staff try to get their money by issuing a claim. But you can issue a winding up (company) petition or a bankruptcy (individual) petition instead.

Winding up and bankruptcy are also ways of enforcing a judgment after a claim has been won, in an effort to actually get your money.

Bankruptcy and winding up procedures should not be used as a means to collect debts. They should only be used when the creditor believes the debtor cannot pay his / her debts.

After making a bankruptcy / winding up order, the Court usually appoints the Official Receiver or Trustee to be receiver and manager of the bankrupt's affairs.

The Official Receiver / Trustee has responsibility from the date of the bankruptcy / winding up for administering and protecting the bankrupt's assets. They must also arrange to pay off outstanding debts.

Creditors may sometimes receive payment of their debt, but more usually they will receive a percentage of what is owed to them.

Debts will be paid in the following order of priority:

• secured creditors - fees and charges of liquidation/bankruptcy
• floating charge holders - companies only
• preferential debtors, including unpaid wages to employees
• unsecured creditors, including HM Revenue & Customs
• interest payable on debts
• shareholders - companies only

How winding up works

• It applies to a company rather than an individual.
• After the winding up the company ceases to exist.
• If the company is insolvent at the time, not all the creditors get paid in full.
• Rules apply and each creditor gets a percentage of what they are owed.

For more information on winding up, see company liquidation.

Bankruptcy applies to a person or a general partnership. If it is a general partnership, all the partners are made bankrupt.  The assets are sold and the proceeds are paid to the unpaid creditors.

Find further guidance on bankruptcy.

The threat and how it works

Often the mere threat of winding up or bankruptcy is very effective. But if the customer still refuses to pay, you might consider the following steps:

• A statutory demand, from a legal stationer or solicitor, or downloadable, can be prepared and issued by the creditor without necessarily using a solicitor to complete the paperwork for you.
• The demand must be delivered to the customer, preferably by hand or by post, using the special delivery or registered mail services. In the case of a registered company, the statutory demand should be served at the registered office.
• On receipt, the customer has a fixed number of days to pay or respond.
• If they do not do so, you can issue a winding up (company) or bankruptcy (individual) petition.
• If you follow all the procedures correctly, and the court finds in your favour, the customer will be wound up or made bankrupt. However, just because you issue the petition does not mean you get priority over whatever money becomes available.

The law assumes that a statutory demand merely paves the way for a petition. But it can be a very powerful debt collecting device in its own right, without the need to proceed to a petition. If the demand results in the issue of a petition (not an order for winding up) it may be publicised on the internet. This means that small businesses have an effective debt collection tool against customers of all sizes.

You should seek legal advice before you act, and you should only act if the money is definitely owing.

As a last resort, if the amount you're owed is more than £750, you can apply to make an individual debtor bankrupt, or issue insolvency proceedings if the debtor is a limited company. Such proceedings can be costly.

Appointing a liquidator or trustee

Where a company is put into liquidation or a person is made bankrupt, you may have to appoint a licensed liquidator or trustee in bankruptcy.

Insolvency practitioners charge fees to the money recovered and you may have to guarantee these fees if the money recovered is not enough.

Legal action should be a last resort to recover debts and you should explore all other options first:

• Take all other reasonable steps, including communicating with the customer - see ensure customers pay you on time.
• Consider some form of alternative dispute resolution (ADR).
• Consider taking back your goods and services, if appropriate.

Mediation is a way of resolving disputes without the need to go to court. It involves using an independent third party - a mediator - who helps both sides come to an agreement.

Negotiation is when the people involved in the dispute - or their representatives, such as solicitors - discuss the issue until they reach an agreement that is acceptable to both sides.

Arbitration involves an independent third party deciding what should happen based on evidence given to them about the dispute. 

Early neutral evaluation (ENE) is when people involved in a dispute send evidence to an independent third person who gives their opinion on the dispute.

If making a claim seems the only answer, you should consider your chances of winning. If your claim is disputed it could be difficult to prove the customer is at fault. You will need to provide as much evidence as you can of the validity of your claim, such as purchase orders or invoices, and copies of reminder letters.

The Advice Services Alliance provides further information on ADR.

Make sure the customer can pay

If the person or business you're taking action against has no assets or has a history of bad debt then you can't be certain of receiving all of the money owed.

Credit reference agencies can provide credit reports on businesses as well as on individual consumers. You will need to have some information ready, such as:

• the name of the business or person you want to get a credit report for
• the last known address
• why you want the credit report

You can check a company's bankruptcy status and outstanding debts with the NI Courts and Tribunals Service.

If you win your claim, the customer is required to pay the sum claimed.

Be prepared for the costs

You will have to pay court fees in advance. However, they may be recovered from the defendant if you win. Note that:

• court fees are payable when you issue a claim and at different stages of the claim, including if you have to enforce the judgment
• if you lose, or do not succeed in enforcing your judgment, you will not be able to reclaim the court fees
• if you win and succeed in enforcing the judgment, you may be able to claim your solicitor's fees and other costs back from the defendant, so long as they are outlined on the court order
• if you refuse to consider alternative ways of sorting out your claim before taking court action, you may not be able to claim your costs back and the court may order you to pay your customer's court costs, even if you win the case
• you can check the current court fees
• you may be able to receive assistance with court fees

The courts each have a different claim limit.

• Small claims courts - for simple cases up to £5,000. For example consumer claims, faulty goods, goods not supplied, goods recovery, debt, breach of contract etc.
• County court - for cases from £5,000 to £30,000.
• High Court - for complex cases and all cases over £30,000.

Even once a claim has been issued it is not too late to sort out the dispute with the customer through some form of alternative dispute resolution and so avoid further court action.

The final warning letter

Whichever course of legal action you choose, you must send a final warning letter to the customer before you begin. You should do this because:

• it often prompts payment
• the courts may penalise you on costs if one is not sent

It is advisable to send the letter using a signed-for delivery service so that the customer can't deny receiving it.

Online claims

If your claim is for a fixed amount that is below £5,000, you may be able to start a claim using the NI Courts and Tribunals Service's small claims online service.

If your case is straightforward, you could prepare the claim, present the case and handle the enforcement on your own. Most people choose not to use solicitors in debt recovery.

But there may be times when you decide you want to seek advice from a solicitor. You should note that:

• legal aid is not usually available for debt recovery
• legal costs aren't normally recoverable

If your claim is likely to be disputed, if your claim is for a large amount or if the case is complicated, it is probably sensible to get professional help from a solicitor or debt recovery agent. 

Choosing a solicitor

Finding a solicitor can be a challenge, and often a personal recommendation is a good way to choose. Before you make a decision, ask the following questions:

• Is there a department specialising in debt recovery?
• Does the firm have a mediator or dispute resolution service that you can consider as an alternative option?
• How will you be charged - rate per hour plus expenses or a percentage of the sum recovered?
• If they do business on a 'no win, no fee' basis, are there any hidden costs? Will you have to pay court costs?

See choose a solicitor for your business.

Debt recovery agents

Other organisations working in debt collection are debt recovery agents and credit agents.

Debt recovery agents employ solicitors and take legal action to recover your money. The Credit Services Association (CSA) provides a directory of debt recovery agents.

Some credit agencies, though not all, will take over the collection of debt. If successful, you will receive an agreed proportion of the total amount owing, while the agency will keep the rest. They usually try to recover debt by:

• sending out routine letters
• telephoning customers

If your claim is for a fixed amount that is below £5,000, you can issue your claim in a small claims court. To do this you need to complete a small claims application form and return it to the court. You can complete your small claims application online with the NI Courts and Tribunals Service.

Completing the form

• Complete the form carefully.  For more information, download the NI Courts and Tribunals Service small claims user guide (PDF, 1MB).
• You are entitled to add the court fee and interest to the amount you are claiming. If a solicitor prepares the claim, other charges may apply that you can also add to the claim.
• The claim form must be signed by you or by someone authorised to sign for you.

Issuing the claim

• You can send or take the claim to any courthouse in Northern Ireland. If the claim is defended, the case will be transferred to the defendant's local court.
• You should supply three copies of the claim form to the issuing court. If there are additional defendants you should send a form for each one.
• You will have to pay the court fee up front.
• Court staff will check that everything is in order, however they are not legally trained and will not be able to provide legal advice. If it is in order, the claim will be given a claim number and served.

The NI Courts and Tribunals Service provide contact details for all NI courts.

You should gather any key documents supporting your case, such as invoices or a delivery sheet signed by your customer. You may have to submit copies of these to the defendant and to the court.

The defendant is allowed 14 days from the deemed date of service of the claim to reply to the claim. However, if the defendant acknowledges service of the claim they can have an extra 14 days. The maximum is 28 days.

On receipt of the court claim the defendant may:

• do nothing
• pay the amount claimed
• admit the claim and make a written application about payment
• acknowledge service and have a 14 day extension to file a defence
• admit the claim and attend court to make an application about payment
• defend part of the claim, admit part of the claim and pay the admitted part
• defend part of the claim, admit part of the claim and ask for time to pay the admitted part
• issue a counterclaim

If the defendant chooses to defend the claim the defence will be sent to you along with an allocation questionnaire for you to complete. You will usually be given 14 days to return the questionnaire.

Be aware that the defendant may file a counterclaim against you. If they do, you will be able to file a defence to the counterclaim and submit it to the court at the same time as returning the allocation questionnaire. See what happens if your debt claim is contested.

Sometimes the judge may deal with the case without a hearing, using written evidence. For example, if you have no chance of successfully winning the claim, or there are no reasonable grounds for you bringing the claim, it may be dismissed without a hearing.

What to do if no defence is entered

If the debtor does not defend the case, you can apply for a judgment from the court at the end of the permitted time. If you issued the claim online you will be able to enter a judgment online. Usually there will be no hearing and a judgment will be made in your favour.

If a defence is entered, the case may progress to a hearing or trial at the defendant's local court. Unless an agreement is reached first a judge will decide the case.

Even if you have started court action, it is not too late to try to reach an agreement with the defendant through some form of alternative dispute resolution.

If you agree to mediate with the other party and it doesn't work, you can still continue with court action.

The small claims court

This is a formal hearing and is usually held quickly (since the Covid-19 pandemic some cases are held remotely via sight link). In a small claims case:

• Evidence is not normally given under oath.
• The claimant and defendant are expected to represent themselves. You can be represented if you wish, but will not be awarded costs for this.
• You may be able to claim limited costs for loss of earnings while attending court, travelling and overnight expenses, and the costs of any witnesses and experts - such as a doctor or surveyor.
• The judge may intervene more than in the other courts as the claimant and defendant are probably not skilled at presenting a case.
• At the end of the hearing the judge tells you their decision and briefly explains the reasons behind it.
• After the hearing both you and the defendant will be sent a copy of the judgment.

View a list of small claims forms available to download from the NI Courts and Tribunals Service.

County court and high court

Taking a case to the county court or to the high court will be a longer process:

• Procedures are much more formal and the case will normally go to trial in court.
• The claimant and defendant are not expected to represent themselves. The preparation of the case can be complex and there may be witnesses or experts with knowledge of particular aspects of the case called to give evidence. 
• Costs are usually awarded, including court fees and legal costs.

You have the right to ask your customer to pay interest under three circumstances. Only one sort of interest can be applied at any one time.

Interest permitted by a contract

Interest written into the contract takes precedence over other forms of interest. However, it must amount to a 'substantial remedy'. In other words it should cover the cost of late payment or deter late payment and should be a fair alternative to statutory interest.

Interest claimed on an issued claim form

This is simple interest only and is at a flat rate of 8% unless the court orders a different rate. It only applies if the case is won or is undefended.

The interest runs from when payment was due until judgment is given by the court. If payment is made before judgment, interest stops at that date. In some circumstances interest can be charged after judgment.

Statutory interest on commercial debts

Statutory interest can be claimed under the Late Payment of Commercial Debts (Interest) Act 1998. In some circumstances costs of up to £100 can also be claimed.

• The rate of interest is 8% over the Bank of England reference rate - the base rates are set on 30 June and 31 December.
• Statutory interest does not apply when you sell to the public. Both seller and buyer must be acting in a commercial capacity.
• For contracts made since 7 August 2002, all businesses and the public sector can claim against all businesses and the public sector.
• Statutory interest can be claimed after late payment has been received. The limit is six years in Northern Ireland.
• The interest usually runs from 30 days after it was due and claimed. A contract or custom and practice may change this, but only if it gives a substantial remedy.
• A contract can't exclude statutory interest, but it is not compulsory to claim it.

Late payment legislation guidance.

The Enforcement of Judgments Office (EJO) is a branch within the Northern Ireland Courts and Tribunals Service and is responsible for the recovery of money, goods and property, where the court has ordered its recovery.

Register of Judgments

The EJO maintains a Register of Judgments, sometimes known as the EJO Debt Register. It records all court orders that have been sent to EJO for recovery action in the previous six years.  

It also provides information about those court orders, if the court order relates to recovery of money and whether or not the amount has been paid in full.

Find out more about the EJO Debt Register.

When may the EJO be used?

A creditor (the person owed money or wants to recovery goods or property) can make a claim against a debtor (the person who owes the money, or is in possession of the goods or property) in court. A Court Judgment may then be made giving details of what is owed or to be recovered and to whom. If the debt is not paid, or the goods or property returned, the creditor may instruct EJO to enforce their court order on their behalf.

Creditors must make an application to have their court order enforced using the appropriate application forms. The creditor must pay an upfront fee to the EJO but ultimately it will be added to the debt which the debtor must pay back.

The EJO provides some help and advice documents.

How to address matters before the EJO become involved

If a court order is made stating you should return goods or property, you should immediately contact the creditor to arrange the return of the goods or property named on the court order.

If the court order is in respect of money, you should contact the creditor and make an offer to repay the debt in full or try to arrange to pay it by instalments.

How does the EJO recover debts?

Most suppliers, investors and staff try to get their money by issuing a claim. But you can issue a winding up (company) petition or a bankruptcy (individual) petition instead.

Winding up and bankruptcy are also ways of enforcing a judgment after a claim has been won, in an effort to actually get your money.

Bankruptcy and winding up procedures should not be used as a means to collect debts. They should only be used when the creditor believes the debtor cannot pay his / her debts.

After making a bankruptcy / winding up order, the Court usually appoints the Official Receiver or Trustee to be receiver and manager of the bankrupt's affairs.

The Official Receiver / Trustee has responsibility from the date of the bankruptcy / winding up for administering and protecting the bankrupt's assets. They must also arrange to pay off outstanding debts.

Creditors may sometimes receive payment of their debt, but more usually they will receive a percentage of what is owed to them.

Debts will be paid in the following order of priority:

• secured creditors - fees and charges of liquidation/bankruptcy
• floating charge holders - companies only
• preferential debtors, including unpaid wages to employees
• unsecured creditors, including HM Revenue & Customs
• interest payable on debts
• shareholders - companies only

How winding up works

• It applies to a company rather than an individual.
• After the winding up the company ceases to exist.
• If the company is insolvent at the time, not all the creditors get paid in full.
• Rules apply and each creditor gets a percentage of what they are owed.

For more information on winding up, see company liquidation.

Bankruptcy applies to a person or a general partnership. If it is a general partnership, all the partners are made bankrupt.  The assets are sold and the proceeds are paid to the unpaid creditors.

Find further guidance on bankruptcy.

The threat and how it works

Often the mere threat of winding up or bankruptcy is very effective. But if the customer still refuses to pay, you might consider the following steps:

• A statutory demand, from a legal stationer or solicitor, or downloadable, can be prepared and issued by the creditor without necessarily using a solicitor to complete the paperwork for you.
• The demand must be delivered to the customer, preferably by hand or by post, using the special delivery or registered mail services. In the case of a registered company, the statutory demand should be served at the registered office.
• On receipt, the customer has a fixed number of days to pay or respond.
• If they do not do so, you can issue a winding up (company) or bankruptcy (individual) petition.
• If you follow all the procedures correctly, and the court finds in your favour, the customer will be wound up or made bankrupt. However, just because you issue the petition does not mean you get priority over whatever money becomes available.

The law assumes that a statutory demand merely paves the way for a petition. But it can be a very powerful debt collecting device in its own right, without the need to proceed to a petition. If the demand results in the issue of a petition (not an order for winding up) it may be publicised on the internet. This means that small businesses have an effective debt collection tool against customers of all sizes.

You should seek legal advice before you act, and you should only act if the money is definitely owing.

As a last resort, if the amount you're owed is more than £750, you can apply to make an individual debtor bankrupt, or issue insolvency proceedings if the debtor is a limited company. Such proceedings can be costly.

Appointing a liquidator or trustee

Where a company is put into liquidation or a person is made bankrupt, you may have to appoint a licensed liquidator or trustee in bankruptcy.

Insolvency practitioners charge fees to the money recovered and you may have to guarantee these fees if the money recovered is not enough.

Legal action should be a last resort to recover debts and you should explore all other options first:

• Take all other reasonable steps, including communicating with the customer - see ensure customers pay you on time.
• Consider some form of alternative dispute resolution (ADR).
• Consider taking back your goods and services, if appropriate.

Mediation is a way of resolving disputes without the need to go to court. It involves using an independent third party - a mediator - who helps both sides come to an agreement.

Negotiation is when the people involved in the dispute - or their representatives, such as solicitors - discuss the issue until they reach an agreement that is acceptable to both sides.

Arbitration involves an independent third party deciding what should happen based on evidence given to them about the dispute. 

Early neutral evaluation (ENE) is when people involved in a dispute send evidence to an independent third person who gives their opinion on the dispute.

If making a claim seems the only answer, you should consider your chances of winning. If your claim is disputed it could be difficult to prove the customer is at fault. You will need to provide as much evidence as you can of the validity of your claim, such as purchase orders or invoices, and copies of reminder letters.

The Advice Services Alliance provides further information on ADR.

Make sure the customer can pay

If the person or business you're taking action against has no assets or has a history of bad debt then you can't be certain of receiving all of the money owed.

Credit reference agencies can provide credit reports on businesses as well as on individual consumers. You will need to have some information ready, such as:

• the name of the business or person you want to get a credit report for
• the last known address
• why you want the credit report

You can check a company's bankruptcy status and outstanding debts with the NI Courts and Tribunals Service.

If you win your claim, the customer is required to pay the sum claimed.

Be prepared for the costs

You will have to pay court fees in advance. However, they may be recovered from the defendant if you win. Note that:

• court fees are payable when you issue a claim and at different stages of the claim, including if you have to enforce the judgment
• if you lose, or do not succeed in enforcing your judgment, you will not be able to reclaim the court fees
• if you win and succeed in enforcing the judgment, you may be able to claim your solicitor's fees and other costs back from the defendant, so long as they are outlined on the court order
• if you refuse to consider alternative ways of sorting out your claim before taking court action, you may not be able to claim your costs back and the court may order you to pay your customer's court costs, even if you win the case
• you can check the current court fees
• you may be able to receive assistance with court fees

The courts each have a different claim limit.

• Small claims courts - for simple cases up to £5,000. For example consumer claims, faulty goods, goods not supplied, goods recovery, debt, breach of contract etc.
• County court - for cases from £5,000 to £30,000.
• High Court - for complex cases and all cases over £30,000.

Even once a claim has been issued it is not too late to sort out the dispute with the customer through some form of alternative dispute resolution and so avoid further court action.

The final warning letter

Whichever course of legal action you choose, you must send a final warning letter to the customer before you begin. You should do this because:

• it often prompts payment
• the courts may penalise you on costs if one is not sent

It is advisable to send the letter using a signed-for delivery service so that the customer can't deny receiving it.

Online claims

If your claim is for a fixed amount that is below £5,000, you may be able to start a claim using the NI Courts and Tribunals Service's small claims online service.

If your case is straightforward, you could prepare the claim, present the case and handle the enforcement on your own. Most people choose not to use solicitors in debt recovery.

But there may be times when you decide you want to seek advice from a solicitor. You should note that:

• legal aid is not usually available for debt recovery
• legal costs aren't normally recoverable

If your claim is likely to be disputed, if your claim is for a large amount or if the case is complicated, it is probably sensible to get professional help from a solicitor or debt recovery agent. 

Choosing a solicitor

Finding a solicitor can be a challenge, and often a personal recommendation is a good way to choose. Before you make a decision, ask the following questions:

• Is there a department specialising in debt recovery?
• Does the firm have a mediator or dispute resolution service that you can consider as an alternative option?
• How will you be charged - rate per hour plus expenses or a percentage of the sum recovered?
• If they do business on a 'no win, no fee' basis, are there any hidden costs? Will you have to pay court costs?

See choose a solicitor for your business.

Debt recovery agents

Other organisations working in debt collection are debt recovery agents and credit agents.

Debt recovery agents employ solicitors and take legal action to recover your money. The Credit Services Association (CSA) provides a directory of debt recovery agents.

Some credit agencies, though not all, will take over the collection of debt. If successful, you will receive an agreed proportion of the total amount owing, while the agency will keep the rest. They usually try to recover debt by:

• sending out routine letters
• telephoning customers

If your claim is for a fixed amount that is below £5,000, you can issue your claim in a small claims court. To do this you need to complete a small claims application form and return it to the court. You can complete your small claims application online with the NI Courts and Tribunals Service.

Completing the form

• Complete the form carefully.  For more information, download the NI Courts and Tribunals Service small claims user guide (PDF, 1MB).
• You are entitled to add the court fee and interest to the amount you are claiming. If a solicitor prepares the claim, other charges may apply that you can also add to the claim.
• The claim form must be signed by you or by someone authorised to sign for you.

Issuing the claim

• You can send or take the claim to any courthouse in Northern Ireland. If the claim is defended, the case will be transferred to the defendant's local court.
• You should supply three copies of the claim form to the issuing court. If there are additional defendants you should send a form for each one.
• You will have to pay the court fee up front.
• Court staff will check that everything is in order, however they are not legally trained and will not be able to provide legal advice. If it is in order, the claim will be given a claim number and served.

The NI Courts and Tribunals Service provide contact details for all NI courts.

You should gather any key documents supporting your case, such as invoices or a delivery sheet signed by your customer. You may have to submit copies of these to the defendant and to the court.

The defendant is allowed 14 days from the deemed date of service of the claim to reply to the claim. However, if the defendant acknowledges service of the claim they can have an extra 14 days. The maximum is 28 days.

On receipt of the court claim the defendant may:

• do nothing
• pay the amount claimed
• admit the claim and make a written application about payment
• acknowledge service and have a 14 day extension to file a defence
• admit the claim and attend court to make an application about payment
• defend part of the claim, admit part of the claim and pay the admitted part
• defend part of the claim, admit part of the claim and ask for time to pay the admitted part
• issue a counterclaim

If the defendant chooses to defend the claim the defence will be sent to you along with an allocation questionnaire for you to complete. You will usually be given 14 days to return the questionnaire.

Be aware that the defendant may file a counterclaim against you. If they do, you will be able to file a defence to the counterclaim and submit it to the court at the same time as returning the allocation questionnaire. See what happens if your debt claim is contested.

Sometimes the judge may deal with the case without a hearing, using written evidence. For example, if you have no chance of successfully winning the claim, or there are no reasonable grounds for you bringing the claim, it may be dismissed without a hearing.

What to do if no defence is entered

If the debtor does not defend the case, you can apply for a judgment from the court at the end of the permitted time. If you issued the claim online you will be able to enter a judgment online. Usually there will be no hearing and a judgment will be made in your favour.

If a defence is entered, the case may progress to a hearing or trial at the defendant's local court. Unless an agreement is reached first a judge will decide the case.

Even if you have started court action, it is not too late to try to reach an agreement with the defendant through some form of alternative dispute resolution.

If you agree to mediate with the other party and it doesn't work, you can still continue with court action.

The small claims court

This is a formal hearing and is usually held quickly (since the Covid-19 pandemic some cases are held remotely via sight link). In a small claims case:

• Evidence is not normally given under oath.
• The claimant and defendant are expected to represent themselves. You can be represented if you wish, but will not be awarded costs for this.
• You may be able to claim limited costs for loss of earnings while attending court, travelling and overnight expenses, and the costs of any witnesses and experts - such as a doctor or surveyor.
• The judge may intervene more than in the other courts as the claimant and defendant are probably not skilled at presenting a case.
• At the end of the hearing the judge tells you their decision and briefly explains the reasons behind it.
• After the hearing both you and the defendant will be sent a copy of the judgment.

View a list of small claims forms available to download from the NI Courts and Tribunals Service.

County court and high court

Taking a case to the county court or to the high court will be a longer process:

• Procedures are much more formal and the case will normally go to trial in court.
• The claimant and defendant are not expected to represent themselves. The preparation of the case can be complex and there may be witnesses or experts with knowledge of particular aspects of the case called to give evidence. 
• Costs are usually awarded, including court fees and legal costs.

You have the right to ask your customer to pay interest under three circumstances. Only one sort of interest can be applied at any one time.

Interest permitted by a contract

Interest written into the contract takes precedence over other forms of interest. However, it must amount to a 'substantial remedy'. In other words it should cover the cost of late payment or deter late payment and should be a fair alternative to statutory interest.

Interest claimed on an issued claim form

This is simple interest only and is at a flat rate of 8% unless the court orders a different rate. It only applies if the case is won or is undefended.

The interest runs from when payment was due until judgment is given by the court. If payment is made before judgment, interest stops at that date. In some circumstances interest can be charged after judgment.

Statutory interest on commercial debts

Statutory interest can be claimed under the Late Payment of Commercial Debts (Interest) Act 1998. In some circumstances costs of up to £100 can also be claimed.

• The rate of interest is 8% over the Bank of England reference rate - the base rates are set on 30 June and 31 December.
• Statutory interest does not apply when you sell to the public. Both seller and buyer must be acting in a commercial capacity.
• For contracts made since 7 August 2002, all businesses and the public sector can claim against all businesses and the public sector.
• Statutory interest can be claimed after late payment has been received. The limit is six years in Northern Ireland.
• The interest usually runs from 30 days after it was due and claimed. A contract or custom and practice may change this, but only if it gives a substantial remedy.
• A contract can't exclude statutory interest, but it is not compulsory to claim it.

Late payment legislation guidance.

The Enforcement of Judgments Office (EJO) is a branch within the Northern Ireland Courts and Tribunals Service and is responsible for the recovery of money, goods and property, where the court has ordered its recovery.

Register of Judgments

The EJO maintains a Register of Judgments, sometimes known as the EJO Debt Register. It records all court orders that have been sent to EJO for recovery action in the previous six years.  

It also provides information about those court orders, if the court order relates to recovery of money and whether or not the amount has been paid in full.

Find out more about the EJO Debt Register.

When may the EJO be used?

A creditor (the person owed money or wants to recovery goods or property) can make a claim against a debtor (the person who owes the money, or is in possession of the goods or property) in court. A Court Judgment may then be made giving details of what is owed or to be recovered and to whom. If the debt is not paid, or the goods or property returned, the creditor may instruct EJO to enforce their court order on their behalf.

Creditors must make an application to have their court order enforced using the appropriate application forms. The creditor must pay an upfront fee to the EJO but ultimately it will be added to the debt which the debtor must pay back.

The EJO provides some help and advice documents.

How to address matters before the EJO become involved

If a court order is made stating you should return goods or property, you should immediately contact the creditor to arrange the return of the goods or property named on the court order.

If the court order is in respect of money, you should contact the creditor and make an offer to repay the debt in full or try to arrange to pay it by instalments.

How does the EJO recover debts?

Most suppliers, investors and staff try to get their money by issuing a claim. But you can issue a winding up (company) petition or a bankruptcy (individual) petition instead.

Winding up and bankruptcy are also ways of enforcing a judgment after a claim has been won, in an effort to actually get your money.

Bankruptcy and winding up procedures should not be used as a means to collect debts. They should only be used when the creditor believes the debtor cannot pay his / her debts.

After making a bankruptcy / winding up order, the Court usually appoints the Official Receiver or Trustee to be receiver and manager of the bankrupt's affairs.

The Official Receiver / Trustee has responsibility from the date of the bankruptcy / winding up for administering and protecting the bankrupt's assets. They must also arrange to pay off outstanding debts.

Creditors may sometimes receive payment of their debt, but more usually they will receive a percentage of what is owed to them.

Debts will be paid in the following order of priority:

• secured creditors - fees and charges of liquidation/bankruptcy
• floating charge holders - companies only
• preferential debtors, including unpaid wages to employees
• unsecured creditors, including HM Revenue & Customs
• interest payable on debts
• shareholders - companies only

How winding up works

• It applies to a company rather than an individual.
• After the winding up the company ceases to exist.
• If the company is insolvent at the time, not all the creditors get paid in full.
• Rules apply and each creditor gets a percentage of what they are owed.

For more information on winding up, see company liquidation.

Bankruptcy applies to a person or a general partnership. If it is a general partnership, all the partners are made bankrupt.  The assets are sold and the proceeds are paid to the unpaid creditors.

Find further guidance on bankruptcy.

The threat and how it works

Often the mere threat of winding up or bankruptcy is very effective. But if the customer still refuses to pay, you might consider the following steps:

• A statutory demand, from a legal stationer or solicitor, or downloadable, can be prepared and issued by the creditor without necessarily using a solicitor to complete the paperwork for you.
• The demand must be delivered to the customer, preferably by hand or by post, using the special delivery or registered mail services. In the case of a registered company, the statutory demand should be served at the registered office.
• On receipt, the customer has a fixed number of days to pay or respond.
• If they do not do so, you can issue a winding up (company) or bankruptcy (individual) petition.
• If you follow all the procedures correctly, and the court finds in your favour, the customer will be wound up or made bankrupt. However, just because you issue the petition does not mean you get priority over whatever money becomes available.

The law assumes that a statutory demand merely paves the way for a petition. But it can be a very powerful debt collecting device in its own right, without the need to proceed to a petition. If the demand results in the issue of a petition (not an order for winding up) it may be publicised on the internet. This means that small businesses have an effective debt collection tool against customers of all sizes.

You should seek legal advice before you act, and you should only act if the money is definitely owing.

As a last resort, if the amount you're owed is more than £750, you can apply to make an individual debtor bankrupt, or issue insolvency proceedings if the debtor is a limited company. Such proceedings can be costly.

Appointing a liquidator or trustee

Where a company is put into liquidation or a person is made bankrupt, you may have to appoint a licensed liquidator or trustee in bankruptcy.

Insolvency practitioners charge fees to the money recovered and you may have to guarantee these fees if the money recovered is not enough.

Legal action should be a last resort to recover debts and you should explore all other options first:

• Take all other reasonable steps, including communicating with the customer - see ensure customers pay you on time.
• Consider some form of alternative dispute resolution (ADR).
• Consider taking back your goods and services, if appropriate.

Mediation is a way of resolving disputes without the need to go to court. It involves using an independent third party - a mediator - who helps both sides come to an agreement.

Negotiation is when the people involved in the dispute - or their representatives, such as solicitors - discuss the issue until they reach an agreement that is acceptable to both sides.

Arbitration involves an independent third party deciding what should happen based on evidence given to them about the dispute. 

Early neutral evaluation (ENE) is when people involved in a dispute send evidence to an independent third person who gives their opinion on the dispute.

If making a claim seems the only answer, you should consider your chances of winning. If your claim is disputed it could be difficult to prove the customer is at fault. You will need to provide as much evidence as you can of the validity of your claim, such as purchase orders or invoices, and copies of reminder letters.

The Advice Services Alliance provides further information on ADR.

Make sure the customer can pay

If the person or business you're taking action against has no assets or has a history of bad debt then you can't be certain of receiving all of the money owed.

Credit reference agencies can provide credit reports on businesses as well as on individual consumers. You will need to have some information ready, such as:

• the name of the business or person you want to get a credit report for
• the last known address
• why you want the credit report

You can check a company's bankruptcy status and outstanding debts with the NI Courts and Tribunals Service.

If you win your claim, the customer is required to pay the sum claimed.

Be prepared for the costs

You will have to pay court fees in advance. However, they may be recovered from the defendant if you win. Note that:

• court fees are payable when you issue a claim and at different stages of the claim, including if you have to enforce the judgment
• if you lose, or do not succeed in enforcing your judgment, you will not be able to reclaim the court fees
• if you win and succeed in enforcing the judgment, you may be able to claim your solicitor's fees and other costs back from the defendant, so long as they are outlined on the court order
• if you refuse to consider alternative ways of sorting out your claim before taking court action, you may not be able to claim your costs back and the court may order you to pay your customer's court costs, even if you win the case
• you can check the current court fees
• you may be able to receive assistance with court fees

The courts each have a different claim limit.

• Small claims courts - for simple cases up to £5,000. For example consumer claims, faulty goods, goods not supplied, goods recovery, debt, breach of contract etc.
• County court - for cases from £5,000 to £30,000.
• High Court - for complex cases and all cases over £30,000.

Even once a claim has been issued it is not too late to sort out the dispute with the customer through some form of alternative dispute resolution and so avoid further court action.

The final warning letter

Whichever course of legal action you choose, you must send a final warning letter to the customer before you begin. You should do this because:

• it often prompts payment
• the courts may penalise you on costs if one is not sent

It is advisable to send the letter using a signed-for delivery service so that the customer can't deny receiving it.

Online claims

If your claim is for a fixed amount that is below £5,000, you may be able to start a claim using the NI Courts and Tribunals Service's small claims online service.

If your case is straightforward, you could prepare the claim, present the case and handle the enforcement on your own. Most people choose not to use solicitors in debt recovery.

But there may be times when you decide you want to seek advice from a solicitor. You should note that:

• legal aid is not usually available for debt recovery
• legal costs aren't normally recoverable

If your claim is likely to be disputed, if your claim is for a large amount or if the case is complicated, it is probably sensible to get professional help from a solicitor or debt recovery agent. 

Choosing a solicitor

Finding a solicitor can be a challenge, and often a personal recommendation is a good way to choose. Before you make a decision, ask the following questions:

• Is there a department specialising in debt recovery?
• Does the firm have a mediator or dispute resolution service that you can consider as an alternative option?
• How will you be charged - rate per hour plus expenses or a percentage of the sum recovered?
• If they do business on a 'no win, no fee' basis, are there any hidden costs? Will you have to pay court costs?

See choose a solicitor for your business.

Debt recovery agents

Other organisations working in debt collection are debt recovery agents and credit agents.

Debt recovery agents employ solicitors and take legal action to recover your money. The Credit Services Association (CSA) provides a directory of debt recovery agents.

Some credit agencies, though not all, will take over the collection of debt. If successful, you will receive an agreed proportion of the total amount owing, while the agency will keep the rest. They usually try to recover debt by:

• sending out routine letters
• telephoning customers

If your claim is for a fixed amount that is below £5,000, you can issue your claim in a small claims court. To do this you need to complete a small claims application form and return it to the court. You can complete your small claims application online with the NI Courts and Tribunals Service.

Completing the form

• Complete the form carefully.  For more information, download the NI Courts and Tribunals Service small claims user guide (PDF, 1MB).
• You are entitled to add the court fee and interest to the amount you are claiming. If a solicitor prepares the claim, other charges may apply that you can also add to the claim.
• The claim form must be signed by you or by someone authorised to sign for you.

Issuing the claim

• You can send or take the claim to any courthouse in Northern Ireland. If the claim is defended, the case will be transferred to the defendant's local court.
• You should supply three copies of the claim form to the issuing court. If there are additional defendants you should send a form for each one.
• You will have to pay the court fee up front.
• Court staff will check that everything is in order, however they are not legally trained and will not be able to provide legal advice. If it is in order, the claim will be given a claim number and served.

The NI Courts and Tribunals Service provide contact details for all NI courts.

You should gather any key documents supporting your case, such as invoices or a delivery sheet signed by your customer. You may have to submit copies of these to the defendant and to the court.

The defendant is allowed 14 days from the deemed date of service of the claim to reply to the claim. However, if the defendant acknowledges service of the claim they can have an extra 14 days. The maximum is 28 days.

On receipt of the court claim the defendant may:

• do nothing
• pay the amount claimed
• admit the claim and make a written application about payment
• acknowledge service and have a 14 day extension to file a defence
• admit the claim and attend court to make an application about payment
• defend part of the claim, admit part of the claim and pay the admitted part
• defend part of the claim, admit part of the claim and ask for time to pay the admitted part
• issue a counterclaim

If the defendant chooses to defend the claim the defence will be sent to you along with an allocation questionnaire for you to complete. You will usually be given 14 days to return the questionnaire.

Be aware that the defendant may file a counterclaim against you. If they do, you will be able to file a defence to the counterclaim and submit it to the court at the same time as returning the allocation questionnaire. See what happens if your debt claim is contested.

Sometimes the judge may deal with the case without a hearing, using written evidence. For example, if you have no chance of successfully winning the claim, or there are no reasonable grounds for you bringing the claim, it may be dismissed without a hearing.

What to do if no defence is entered

If the debtor does not defend the case, you can apply for a judgment from the court at the end of the permitted time. If you issued the claim online you will be able to enter a judgment online. Usually there will be no hearing and a judgment will be made in your favour.

If a defence is entered, the case may progress to a hearing or trial at the defendant's local court. Unless an agreement is reached first a judge will decide the case.

Even if you have started court action, it is not too late to try to reach an agreement with the defendant through some form of alternative dispute resolution.

If you agree to mediate with the other party and it doesn't work, you can still continue with court action.

The small claims court

This is a formal hearing and is usually held quickly (since the Covid-19 pandemic some cases are held remotely via sight link). In a small claims case:

• Evidence is not normally given under oath.
• The claimant and defendant are expected to represent themselves. You can be represented if you wish, but will not be awarded costs for this.
• You may be able to claim limited costs for loss of earnings while attending court, travelling and overnight expenses, and the costs of any witnesses and experts - such as a doctor or surveyor.
• The judge may intervene more than in the other courts as the claimant and defendant are probably not skilled at presenting a case.
• At the end of the hearing the judge tells you their decision and briefly explains the reasons behind it.
• After the hearing both you and the defendant will be sent a copy of the judgment.

View a list of small claims forms available to download from the NI Courts and Tribunals Service.

County court and high court

Taking a case to the county court or to the high court will be a longer process:

• Procedures are much more formal and the case will normally go to trial in court.
• The claimant and defendant are not expected to represent themselves. The preparation of the case can be complex and there may be witnesses or experts with knowledge of particular aspects of the case called to give evidence. 
• Costs are usually awarded, including court fees and legal costs.

You have the right to ask your customer to pay interest under three circumstances. Only one sort of interest can be applied at any one time.

Interest permitted by a contract

Interest written into the contract takes precedence over other forms of interest. However, it must amount to a 'substantial remedy'. In other words it should cover the cost of late payment or deter late payment and should be a fair alternative to statutory interest.

Interest claimed on an issued claim form

This is simple interest only and is at a flat rate of 8% unless the court orders a different rate. It only applies if the case is won or is undefended.

The interest runs from when payment was due until judgment is given by the court. If payment is made before judgment, interest stops at that date. In some circumstances interest can be charged after judgment.

Statutory interest on commercial debts

Statutory interest can be claimed under the Late Payment of Commercial Debts (Interest) Act 1998. In some circumstances costs of up to £100 can also be claimed.

• The rate of interest is 8% over the Bank of England reference rate - the base rates are set on 30 June and 31 December.
• Statutory interest does not apply when you sell to the public. Both seller and buyer must be acting in a commercial capacity.
• For contracts made since 7 August 2002, all businesses and the public sector can claim against all businesses and the public sector.
• Statutory interest can be claimed after late payment has been received. The limit is six years in Northern Ireland.
• The interest usually runs from 30 days after it was due and claimed. A contract or custom and practice may change this, but only if it gives a substantial remedy.
• A contract can't exclude statutory interest, but it is not compulsory to claim it.

Late payment legislation guidance.

The Enforcement of Judgments Office (EJO) is a branch within the Northern Ireland Courts and Tribunals Service and is responsible for the recovery of money, goods and property, where the court has ordered its recovery.

Register of Judgments

The EJO maintains a Register of Judgments, sometimes known as the EJO Debt Register. It records all court orders that have been sent to EJO for recovery action in the previous six years.  

It also provides information about those court orders, if the court order relates to recovery of money and whether or not the amount has been paid in full.

Find out more about the EJO Debt Register.

When may the EJO be used?

A creditor (the person owed money or wants to recovery goods or property) can make a claim against a debtor (the person who owes the money, or is in possession of the goods or property) in court. A Court Judgment may then be made giving details of what is owed or to be recovered and to whom. If the debt is not paid, or the goods or property returned, the creditor may instruct EJO to enforce their court order on their behalf.

Creditors must make an application to have their court order enforced using the appropriate application forms. The creditor must pay an upfront fee to the EJO but ultimately it will be added to the debt which the debtor must pay back.

The EJO provides some help and advice documents.

How to address matters before the EJO become involved

If a court order is made stating you should return goods or property, you should immediately contact the creditor to arrange the return of the goods or property named on the court order.

If the court order is in respect of money, you should contact the creditor and make an offer to repay the debt in full or try to arrange to pay it by instalments.

How does the EJO recover debts?

Most suppliers, investors and staff try to get their money by issuing a claim. But you can issue a winding up (company) petition or a bankruptcy (individual) petition instead.

Winding up and bankruptcy are also ways of enforcing a judgment after a claim has been won, in an effort to actually get your money.

Bankruptcy and winding up procedures should not be used as a means to collect debts. They should only be used when the creditor believes the debtor cannot pay his / her debts.

After making a bankruptcy / winding up order, the Court usually appoints the Official Receiver or Trustee to be receiver and manager of the bankrupt's affairs.

The Official Receiver / Trustee has responsibility from the date of the bankruptcy / winding up for administering and protecting the bankrupt's assets. They must also arrange to pay off outstanding debts.

Creditors may sometimes receive payment of their debt, but more usually they will receive a percentage of what is owed to them.

Debts will be paid in the following order of priority:

• secured creditors - fees and charges of liquidation/bankruptcy
• floating charge holders - companies only
• preferential debtors, including unpaid wages to employees
• unsecured creditors, including HM Revenue & Customs
• interest payable on debts
• shareholders - companies only

How winding up works

• It applies to a company rather than an individual.
• After the winding up the company ceases to exist.
• If the company is insolvent at the time, not all the creditors get paid in full.
• Rules apply and each creditor gets a percentage of what they are owed.

For more information on winding up, see company liquidation.

Bankruptcy applies to a person or a general partnership. If it is a general partnership, all the partners are made bankrupt.  The assets are sold and the proceeds are paid to the unpaid creditors.

Find further guidance on bankruptcy.

The threat and how it works

Often the mere threat of winding up or bankruptcy is very effective. But if the customer still refuses to pay, you might consider the following steps:

• A statutory demand, from a legal stationer or solicitor, or downloadable, can be prepared and issued by the creditor without necessarily using a solicitor to complete the paperwork for you.
• The demand must be delivered to the customer, preferably by hand or by post, using the special delivery or registered mail services. In the case of a registered company, the statutory demand should be served at the registered office.
• On receipt, the customer has a fixed number of days to pay or respond.
• If they do not do so, you can issue a winding up (company) or bankruptcy (individual) petition.
• If you follow all the procedures correctly, and the court finds in your favour, the customer will be wound up or made bankrupt. However, just because you issue the petition does not mean you get priority over whatever money becomes available.

The law assumes that a statutory demand merely paves the way for a petition. But it can be a very powerful debt collecting device in its own right, without the need to proceed to a petition. If the demand results in the issue of a petition (not an order for winding up) it may be publicised on the internet. This means that small businesses have an effective debt collection tool against customers of all sizes.

You should seek legal advice before you act, and you should only act if the money is definitely owing.

As a last resort, if the amount you're owed is more than £750, you can apply to make an individual debtor bankrupt, or issue insolvency proceedings if the debtor is a limited company. Such proceedings can be costly.

Appointing a liquidator or trustee

Where a company is put into liquidation or a person is made bankrupt, you may have to appoint a licensed liquidator or trustee in bankruptcy.

Insolvency practitioners charge fees to the money recovered and you may have to guarantee these fees if the money recovered is not enough.