If you’re a business owner who has experienced the frustration of debtors who refuse to pay, you know how challenging it can be to get your money back.
You want to take action and pursue the money owed to you, but sometimes you don’t know where to start.
This blog post will discuss tips and strategies for dealing with debtors who refuse to pay. We’ll also provide advice on protecting yourself from future incidents like this.
1. Forgive and Forget
In some cases, the best option is to forgive and forget instead of stressing yourself over it. Debtors may refuse to pay because they’re experiencing financial troubles, such as medical issues, loss of a job, or divorce.
If you have reason to believe that the debtor is experiencing hardship, it may be worth forgiving them and letting go so they can get back on their feet. After all, we’ve all been there at one point in our lives!
Forgiving someone who owes you money might seem like an unusual thing. They may be more likely to work with you if you show them some compassion.
When forgiving debts, you need to adjust your account receivables record. by writing it off.
2. Extend the Deadline of the Debt
Sometimes debtors may need extra time to pay off debts. This is especially true if they’re experiencing financial difficulties or have recently experienced a loss.
Extending the deadline of their debt can give them some breathing room to focus on other matters in their lives instead of worrying about how and when to come up with the money owed to you.
If you decide to extend their deadline, both parties must agree on a new date and time frame in writing. Your business can also charge interest.
3. Issue a Demand Letter
You can also issue a formal or statutory demand letter if you’ve done everything to collect, but they still refuse to pay. A demand letter is an official document that informs the debtor of their unpaid debt and requests payment within a specific date.
Other information in the demand letter includes:
- A summary of the debt
- The amount owed
- How and when the debt was incurred
- What actions you’ve already taken to collect the money
- Proof that the debtor has received your letters or other attempts to contact them about the debt
Ensure all your documentation is in order before sending this letter to avoid confusion. The debtor then has 21 days to respond by paying or disputing it. If you don’t hear anything from them, you can pursue legal action.
3. Pursue Legal Action
If the debtor still refuses to pay after you’ve taken all of these measures, it’s time to pursue legal action. This can be a long and tedious process, but it may be the only way to get your money back.
You’ll need to file a lawsuit in civil court and present evidence that the debtor owes you money. You’ll also need to prove that you’ve tried to collect the money in other ways.
If the court finds it in your favour, they’ll issue a judgment against the debtor, ordering them to pay what they owe. You can hire process servers to deliver court notices if the debtor is difficult to find.
Some legal options include:
- Apply a bankruptcy order against them. It will force the debtor to sell their assets and repay you what they owe.
- Apply for a freezing order. It will prevent the debtor from selling or transferring any assets until the debt is repaid.
- Wind up the business. If they’re a company, you can force it to close.
You can also consider mediation, an informal process where a third party will help you resolve the issue. It allows you to end the problem in a more private and less stressful environment. It also supports both parties come up with a mutually beneficial solution.
Either way, remember that legal action is difficult and time-consuming. You’ll also have to pay court fees if the case goes against your favour. It may be worth trying other methods before pursuing this option.
Otherwise, hire a solicitor to help you through the process and even guide you in choosing the best legal strategy to collect the debt.
Debtors refusing to pay can be a massive headache for any business owner. However, using these tips and strategies can increase your chances of collecting what’s owed to you.
Remember to stay patient and keep communicating with the debtor. Sometimes they may need a little push in the right direction. Otherwise, hire a solicitor to help you with your debt collection.