Minimise the costs of dealing with creditor claims
If you are an individual with a large personal or business creditor threatening legal action against you, it is essential to bear in mind that if the creditor does take formal legal action, at each stage of the legal action the costs of resolving matters with the creditor will increase significantly.
If a creditor is successful in obtaining a county court judgement (which will happen if no action is taken to enter a defence), the court will add costs and interest. If the judgement is left unpaid, a creditor can issue a bankruptcy petition. The costs of the creditor’s solicitor, which must be paid if the creditor is to be dealt with, dependent on the number of hearings required, can often run up around £3,000.
If the individual facing this enforcement action by a creditor still does not seek advice as to how to deal with the creditor, it is very likely that a Bankruptcy Order will be made. Once a Bankruptcy Order is made, the individual will be obliged to settle the costs of the Official Receiver, a civil servant who initially acts as the trustee of the bankruptcy estate, which start at a minimum of £8775.
Once an individual is subject to a Bankruptcy Order, his/her ability to obtain credit and bank account facilities will be severely restricted.
Further, Once an individual is subject to a Bankruptcy Order he/she will require expert advice if he/she wishes to prepare an application to the court for the annulment of the Bankruptcy Order or wishes to enter an Individual Voluntary Arrangement (IVA) as an alternative means of dealing with outstanding liabilities. The costs of this advice may start at around £2,000, but can be considerably more.
In summary, to minimise the accumulated costs of dealing with creditors you or your client must act before the enforcement action progresses as outlined above.
As soon as you or your client feels threatened by a creditor, do not be afraid to pick up the phone! Chamberlain & Co offer a free initial advisory phone call or can give advice whenever needed at a reasonable cost.
