PAPa Debt!

The title of this article includes the acronym for the new Pre-Action Protocol for Debt Claims. It came into force on the 1st October 2017.  The Civil Procedure Rules contain Protocols for other types of claim but this one applies to any business, including a sole trader pursuing debts from an individual, who can also be a sole trader.

It seeks to encourage early engagement and communication between the parties including exchange of information to help clarify the issues, enabling them to resolve the matter without the need to start Court proceedings.   This can include negotiation, mediation,.and other types of dispute resolution .    It encourages parties to act in a reasonable and proportionate manner without running up costs and sees that if proceedings do have to commence that they will be managed in an efficient manner.

Under it, the Creditor must provide full details including how the debt arose, from what contract, if interest is claimed and giving an up to date statement of debt .   The creditor must provide a reply form (Annex 1) and  a debtor  financial statement  (Annex 2).

The letter of claim should be sent by post and to such other addresses (including email) as the debtor may have.   If the debtor does not reply within 30 days proceedings can commence.    If the debtor does reply in time indicating they are seeking debt advice, the creditor must allow the debtor a reasonable time period for obtaining that advice usually not less than 30 days from the reply form.   If the debtor has asked for further documentation from the creditor, he/she must provide that documentation or explain why it is absent within 30 days of the receipt of request.   If the debtor indicates they require time to pay, the parties should try to reach agreement for the debt to be paid by instalments based upon the debtor’s income and expenditure which should be set out in Annex 2.   Where agreement is reached concerning repayment of the debt, the creditors should not start proceedings if those terms are complied with.   The Court will expect the parties to have complied with this protocol before commencing any proceedings in order to enable claims to be settled without them, and if Court proceedings are commenced a reasonable attempt has been made to narrow the issues to reduce Court time.

The information sheet provided by the creditor will give the debtor information about seeking debt advice from the CAB and other organisations.

While the Protocol may initially increase the administrative cost of debt recovery, once  in place  it may well lead to a more efficient  and successful means of recovering debts  and it can  avoid unnecessary litigation costs.  Debtors can put forward their position clearly and indicate the difficulties they may have financially so that repayments can be made over a reasonable period without litigation costs or the risk of having a County Court Judgement against their name.

This article provides only a general summary and is not intended to be comprehensive.  Special legal advice should be taken in any individual situation.



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