Suing a Business That Won't Pay: Your Options for Recovering a Commercial Debt
Unpaid invoices and late-paying clients are among the most common — and most damaging — problems facing small and medium businesses. When polite reminders and phone calls fail, understanding your legal options for debt recovery becomes essential to protecting your cash flow and your business.
Step 1: The Letter Before Action
Before issuing court proceedings, the law requires (and courts expect) that you send a Letter Before Action — a formal written demand setting out the debt owed, the basis for it, and a deadline for payment, typically 14 to 30 days. This step alone often prompts payment, as it signals serious intent and puts the debtor on notice that legal costs may follow.
Step 2: Consider a Statutory Demand
For debts over £750 owed by a company, a Statutory Demand can be a powerful tool. It formally demands payment within 21 days and warns that failure to pay may result in a winding-up petition — a serious threat that often prompts swift settlement, given the reputational and operational risk winding-up poses to a business.
Step 3: Issuing County Court Proceedings
If informal steps fail, the next stage is issuing a claim through the County Court. For most commercial debts, this involves:
Filing a claim setting out the amount owed and the basis of the claim
Serving the claim on the debtor, who then has an opportunity to respond
Default judgment — if the debtor doesn't respond, you can apply for judgment in your favour without a hearing
Defended claims — if the debtor disputes the debt, the case proceeds toward a hearing, where evidence is presented before a judge
Which Court Track Applies?
Small Claims Track — generally for debts up to £10,000, designed to be faster and lower-cost, often without needing a solicitor to attend
Fast Track — typically for claims between £10,000 and £25,000
Multi-Track — for larger or more complex commercial debt claims
What If the Debtor Still Won't Pay After Judgment?
Winning a judgment doesn't automatically mean you'll receive payment. If the debtor still doesn't pay, enforcement action may be necessary, including:
Warrant of Control — instructing bailiffs to seize goods to the value of the debt
Attachment of Earnings Order — deducting payments directly from wages (for individuals)
Third Party Debt Order — freezing and recovering funds directly from the debtor's bank account
Charging Order — securing the debt against property owned by the debtor
Should You Always Go to Court?
Not necessarily. Litigation carries cost, time, and risk — even strong claims can be affected by a debtor's insolvency or inability to pay. Before committing to court proceedings, it's worth considering:
The debtor's ability to actually pay, even if you win
Whether negotiation or a payment plan might achieve a faster, more certain outcome
The value of the ongoing business relationship, if any
The proportionality of legal costs relative to the debt owed
How We Can Help
Our civil litigation team helps businesses recover unpaid debts efficiently, from initial demand letters through to court proceedings and enforcement where necessary. We provide commercially minded advice at every stage, helping you decide the most effective route to recovery.
