Throwing Good Money after Bad – the Short Guide to Using the Law to get Paid Quickly
Lovegrove Smith & Cotton
If you or your business needs to recover a debt, how successful you are in recovering your debt is often influenced not only by the facts of your case but also the strategies you deploy to recover your debt. Often, businesses can increase their chances of achieving positive and cost effective outcomes by adopting a few straightforward techniques. Here are a few pointers:
1. Engage a “Closer”
It is important to use a lawyer that makes your commercial objectives a priority.
There are two types of lawyers out there, lawyers that “fight every fight”, and lawyers that “seal the deal” (also known as “Closers”). The Closers look at monetary disputes in a totally different light to the former type of lawyers.
The first thing “Closers” consider is whether the maximum amount of money you can retrieve is outweighed by the cost of litigation. Whilst you may have a claim that has strong chances of success in Court, the harsh reality of it all is that there is never any guarantee that you will recover all (if any) of your legal fees. Thus, it is critical before you proceed with an action to assess whether it is worth spending ‘good money after bad’.
2. Develop a Strategy
(a) Know your bottom line
Never allow your emotions to motivate you to take legal action. You are a business, it’s all about the dollars and getting things done. Know the amount you’re willing to settle for and don’t get distracted. Often, the benefits of seeing things partially from the opposing side and preserving a future business relationship, are under estimated.
(b) Settle for Less than You are Owed
It is extremely important to be aware of your debtor’s financial position and the likelihood as to whether or not they will be able to pay the whole debt.
If the debtor does not have the financial means to pay the whole debt, it would be futile to pursue the debtor in court, and legal fees will take their toll on you. Take what you can and write off your losses. Your lawyer will help you secure the best deal possible in the circumstances.
(c) Accept Instalment Orders
Some debtors might agree that they owe you money, and offer to pay you the amount by instalments. Given that there is no guarantee with litigation, and put simply, things don’t happen overnight, getting paid by the drip is better than not getting paid at all.
Remember, the goal is to retrieve your money.
(d) Be Realistic
In order to give you the best chance, your lawyer needs to be fully aware of anything which could jeopardise your claim so they can be entirely prepared to handle issues or arguments your opponent may bring up.
This process is about give and take. You will have strong points and weak points, know when to compromise and don’t “fight every battle”.
(a) Letter of Demand
Get your lawyer to send a letter of demand to the debtor. A demand for payment is better coming from a lawyer than from you. You can get much farther with a kind word and a gun than you can with a kind word alone. Just the one letter should suffice, don’t engage in “paper warfare” after the first letter.
(b) Issue Proceedings and Negotiate at all Costs
Don’t be afraid to spend some money to get some money. If you do not receive a satisfactory response to the demand, commence legal proceedings in Court. More often than not, settlements are reached when proceedings have been issued.
For more advice and assistance with debt recovery or contract disputes, contact lawyers with expertise in this area.