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New Debt Claim procedure

A pre-action protocol relating to debt claims has for the first time been introduced as of 1 October 2017.

The protocol requires certain steps to be taken and certain information to be provided to the debtor before legal proceedings can be started.

However, the protocol only applies to debts owed to a business by an individual or sole trader, not business to business debts.

The aim of the protocol is to encourage early engagement and communication between the parties and help them to resolve the matter- including agreeing a payment plan – without the need to start court proceedings.

The protocol requires that a letter of claim be sent to the debtor containing the following information:

  • The amount of the debt;
  • Whether interest or changes are continuing;
  • Where the debt arises from an oral agreement the date of the agreement, who made it, when and where;
  • Where the debt arises from a written agreement the date of it, the parties to it and that a copy can be requested;
  • If the debt has been assigned the details of the original debt and creditor, when it was assigned and to whom;
  • If instalments are being offered (or paid) why the offer is not acceptable;
  • Details of how the debt can be paid and how to proceed if the debtor wishes to discuss payment options; and
  • the address to which the reply form should be sent.

The letter of claim must also:

  • Enclose an up to date statement of account including interest and other charges;
  • Enclose a copy of the approved Information Sheet and Reply Form; and
  • Enclose a Financial Statement Form for the debtor to complete.

The letter of claim must be sent by post but can also be sent by email or other media if details are available.

If the debtor does not respond to the letter of claim within 30 days the creditor may start court proceedings. Should the debtor indicate that they are seeking debt advice the creditor may start court proceedings and should consider using an appropriate form of Alternative Dispute Resolution (ADR), the most common of which is mediation.

A failure to comply with this protocol will be taken into account by the court in the event that a solution is not found and proceedings are required, and the non complying party may be penalised in costs.

Copies of The Information Sheet, the Reply Form and the Standard Financial Statement are available to download here.

If you would like any more information in relation to this article then please feel free to contact me via email: or visit my profile.

Web site content note:
This is not legal advice; it is intended to provide information of general interest about current legal issues.

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