Before raising an action

A clear letter setting out the sum, the basis of the debt and a deadline recovers a surprising proportion of debts on its own, and where it does not it puts you in a strong position on expenses. Keep it factual and keep a copy. Where the debtor may simply be unable to pay, establishing that early saves throwing good money after bad.

Which court procedure applies

Simple procedure is deliberately accessible and the forms can be completed online. Expenses recoverable in the lowest bracket are capped, which means that instructing a solicitor for a very small debt often costs more than it recovers. That is worth knowing before you start rather than afterwards.

Getting a decree is not the same as getting paid

A decree is an entitlement, not a payment. Enforcement in Scotland is called diligence and is carried out by sheriff officers.

Most diligence begins with a charge for payment, which gives the debtor fourteen days to pay. After that the options include an earnings arrestment, which takes a proportion of wages at source each pay day; a bank arrestment, which freezes funds in an account; an attachment of goods outside the home; and an inhibition, which prevents the debtor selling or borrowing against heritable property. An inhibition is often the most effective of all against a debtor who owns a house, because it works by blocking a sale rather than by extracting cash.

Against a limited company, arresting the trading bank account is usually the quickest route. Against an individual with no assets, no diligence will help, and the practical question becomes whether the debt is worth pursuing at all.

Insolvency as leverage

Where the debtor is a company, a winding-up petition is a powerful lever but a blunt one, and it should never be used where the debt is genuinely disputed. Against an individual, sequestration is available where the debt exceeds the statutory minimum and the proper preliminary steps have been taken. Both routes put you in a queue with other creditors, so the leverage is usually worth more than the eventual dividend.

Interest and business debts

Judicial interest runs on a decree. Separately, businesses supplying other businesses have a statutory right to interest and a fixed sum for late payment, which applies automatically unless the contract provides a substantial remedy of its own. Many creditors never claim it.

What to do now

1. Check when the debt fell due and how close it is to five years.
2. Gather the contract, invoices, delivery notes and any written acknowledgement of the debt.
3. Send a clear letter with a deadline before doing anything else.
4. Find out what the debtor actually owns before spending money on enforcement.