In these cash-strapped times, more and more businesses will find their customers ceasing to pay. Creditors have to decide whether it is viable to pursue the debt.

In these cash-strapped times, more and more businesses will find their customers ceasing to pay. Creditors have to decide whether it is commercially viable to pursue recovery of the debt, writes Sarah McLennan, an associate in the London finance and restructuring practice at law firm Faegre and Benson.

Pursuing a bad debt could mean obtaining a charge over property or sending the bailiff round to seize goods – but attempting this is useless if the debtor has no assets worth seizing and you’ll end up wasting time that could be a lot better spent. These are the steps you should take if you are having problems with a corporate debtor:

1. Check its insolvency status on the Companies House website and notify any appointed insolvency practitioner of the debt to make a claim in the liquidation.

2. If nothing is registered at Companies House, call the Companies Court to find out whether there is an outstanding petition against the company. If there is you can obtain details of the petitioning creditor to find out how much they are owed and be substituted as petitioning creditor if that creditor withdraws.

3. Obtain a company search and analyse the last filed accounts.

4. Depending on the value of the debt, consider instructing an enquiry agent to look into the assets of your debtor.

5. Search the County Court Judgments register. Obviously if there are lots of judgments registered against your debtor it may not be worth your while pursuing the debt.

6. Search the Land Registry to find out who owns any property that the company is trading from and try to ascertain whether there is any equity. If you obtain judgement against the debtor you can then apply for a charge to secure it. You can get a drive-by valuation done by an estate agent of any property the debtor owns.

7. Consider whether you know of any third party who owes your debtor money as you may be able to obtain a third party debt order to get that third party to pay you instead of the debtor.

If your debtor is an individual, then most of the above apply. You should search the insolvency register instead of the Companies House website to find out if the debtor is bankrupt. In addition you can consider an attachment of earnings order to get any judgment paid direct from the debtor’s wages if the debtor is in employment.

Once you have more information about the solvency and assets of your debtor you can decide whether to issue proceedings against them. If they have no assets then you may find it is better to write off the debt than spend more money trying to recover it.

Legal advice should then be sought on the most cost effective and appropriate process of recovery i.e. an insolvency process or issuing a claim form.

Contact the writer.