The law and your debts 


Every year many people find that they cannot pay the debts they owe. Some of the debts that people could find themselves facing include:

  • Mortgage arrears
  • Council tax
  • Income and other business taxes
  • Hire purchase agreements
  • Utility bills
  • Bank overdrafts
  • Loans

Call us if you are in debt and are unsure how to approach your finances. We can recommend an expert financial advisor to help deal with your creditors.

Going to court

Debt litigation is where a party pursues legal action against someone else, usually by taking them to court, in order to recover a debt. If you wish to pursue debt litigation, you must be able to prove that the person you are taking debt action against is in your debt.

You may be able to prove this if you had a contract with the person indebted to you. For example:

  • You may have agreed to provide a service to the other party in return for a payment of £15,000
  • This agreement between yourself and the other party is a contractual agreement
  • If the other party does not pay you the £15,000 after you have provided them with the service then they will be in breach of contract
  • You will then be able to pursue debt litigation against the other party for breach of contract

You may also be able to claim interest on the £15,000 debt under the Late Payment of Commercial Debts Act 1998 (referred to as ‘the Act’). Often in commercial contracts between two parties there is a clause which provides for charging interest on the debt in the event of late or non-payment. If you did have such a clause, then you would be able to claim interest under the contract.

Alternatives to litigation

Prior to commencing debt litigation, you should consider your alternatives. Litigation can be very expensive and in some cases is not worth pursuing, for example, if your opponent is bankrupt.

The use of the courts regarding debt law usually means the Small Claims Court. Here any individual that you owe money to can take you to court if you have not paid your debt. Debt law also allows government agencies such as HMRC (HM Revenue & Customs) to use the Small Claims Court to obtain the tax you owe them.

If you are taken to court over a debt you owe, it is always a good idea to have legal representation. Having a solicitor represent you is very important if you think you do not owe the debt. In these cases of disputed debts, the law will come into action and a court will consider the evidence and make a judgment.

You can use debt law to your advantage, but as this is a complex area of law, always seek qualified advice as soon as you can.

Debt law states that all the organisations that you owe money to should treat your case sympathetically. You should contact the organisation that you owe money to as soon as you can. Don’t ignore your debts, as this will simply make them worse. Most people find that facing the debts they owe and being honest about their circumstances will often allow them to come to an arrangement with the organisations they are in debt to.

For further advice if you are dealing with debt collectors, or debt collection solicitors, see our information page on debt collectors.

Are you in debt and being chased for payment? Are you owed debt and wish to pursue the money through the court system? Contact Law can put you in touch with a specialist financial advisor who can advise on all elements of the law relating to debt. Please call us on 0800 1777 162 or complete the web-form above.

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