How Much does it Cost to Collect a Debt?

Wondering how much does it costs to collect a debt? More often than not, it will cost you nothing to collect money owed to you.

Going further, you may also be surprised to learn that the amount recovered can often exceed what was originally owed – this is due to your general entitlement to claim interest from the party that owes you money. Even without claiming interest, debt recovery can near-effectively be cost neutral. By looking at each stage of the recovery process in more detail, we explain how Debt-Claims’ sensible pricing structure has been designed to minimise expenditure.

The Pre-Legal Stage

Debt-Claims has two pre-legal solutions: the Late Payment Demand (LPD) and the Letter Before Action (LBA). Both of these are sent on our solicitor-headed paper, letting the debtor know that solicitors have been instructed. Our carefully and strategically worded letters are often all that is needed to get the debtor to sit-up and address what they owe.

The LPD is an informal letter that is used to remind the debtor that they owe you a sum of money and it needs paying and its focus is on maintaining the relationship between them and you. The LBA is a formal letter that must be sent before legal proceedings are issued.

Our LPD costs just £2.50 when sent by email only and you can elect to send the same by post, or post and email, for £5.00 and £6.00 respectively. Our LBA costs just £12.50 for post only, and £15.00 for post and email. Around 95% of debts which we are instructed on are collected solely with a letter. Further, both the LPD and LBA prompt you to add interest (and compensation where appropriate) to the debt amount – the sum of which often exceeds the cost of our letter meaning that it has not cost you anything to collect what’s owed. Importantly, Debt-Claims do not charge any commission on collection, nor do we keep any element of interest, compensation, or reasonable or contractual costs. As you will see with our pricing structure, debts collected at the pre-legal stage will at the most, cost you a few pounds.

The Legal Stage

The cost to issue legal proceedings consists of two elements, the Court Issue Fee and fixed solicitor costs. The Civil Procedure Rules and Civil and Family Court Fees sheets set out how much can be claimed back from the debtor.

Court Issue Fee – this is paid to the court and is their fee for issuing the claim. For money/debt claims, the court issue fee is always added onto the balance claimed. When issuing a claim through Debt-Claims, we pay this fee on your behalf and invoice you in turn.

Fixed Solicitor Costs – you are entitled to claim an amount back from the debtor for the fixed costs that your solicitor charges you to issue proceedings. These costs are a sliding scale depending on the amount claimed.

At Debt-Claims, when you issue a claim with a value of less than £10,000 then we only charge you the same fixed solicitor costs that you can recover from the debtor. These fixed costs, along with the Court Issue Fee, are added onto the balance claimed. Therefore when the debtor pays in full, they pay you back the costs of issuing proceedings.

For debtors who fail to pay in full following proceedings being issued, then you would want to request from the court that a CCJ (County Court Judgment) is entered against them. Our costs for entering a CCJ (whether by default, admission, or determination) are again the same costs that are recoverable from the debtor, so that your CCJ against them includes all the legal costs that you have incurred.

The Enforcement Stage

Whilst there are several ways to enforce a CCJ (to force the debtor to pay) the two most commonly used are Court Bailiffs and High Court Enforcement Officers. Both of these methods of enforcement consist of a Court Issue Fee and fixed solicitor costs. In the same way as with issuing proceedings or requesting a CCJ, Debt-Claims only charges you the same recoverable costs – meaning that once the CCJ is paid in full, your legal costs are also paid in full and you may very well have also claimed interest, meaning that a larger payment is due to you.

At Debt-Claims we pride ourselves on affordable legal representation. This brief outline of the costs of debt recovery sets out how our fees are designed to not leave you out of pocket and any stage of the legal process.

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