What are your legal options if you are owed money?

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If you are owed money, court action should usually be a last resort as it can be both costly and time-consuming.

There are several reasons why you might want to pursue someone else for money. It could be connected to an unpaid loan or a cash gift that you want returned.

Negotiation and mediation

Your first port of call should be to simply talk to the person who owes you money and ask for it back. If this fails and things are getting heated or the debtor refuses to acknowledge your claim, you could try mediation.

This involves you sitting down with a trained mediator who does not take sides, but merely helps you and the other party talk through your issues until a satisfactory resolution for both can be found.

Statutory demand

Mediation is not for everyone – particularly if there is a lot of bad feeling between the parties. Another tactic, if the debt is undisputed but payment is not forthcoming, is to ask a solicitor to send a statutory demand (should the criteria for such be met).

This is a formal written demand for the money you are owed. Once the debtor receives it, they have three weeks to pay; if they do not pay, you can use the statutory demand to ask the court for a winding up order (in the case of a company) or a bankruptcy order (if the debtor is an individual).

Bankruptcy and winding up orders

You can only start bankruptcy proceedings against someone who owes you £5,000 or more and you can only apply to have a company to be wound up if they owe you £750 or more. You have four months to apply to bankrupt or wind up your debtor. If you are late, you will have to explain your reasons to the court named on the statutory demand. If you are successful in obtaining a bankruptcy or winding up order, the debtor’s assets and finances can be seized to pay off the debt; however, there is no guarantee that the funds raised will be enough to cover the debt and other creditors may come forward with debts that take priority over your own.

Debt collector

It is possible to ‘sell’ the debt to a debt collector. They will pay you a reduced sum, but this course of action takes the stress of collecting the debt away from you. Once you have sold the debt, it is their responsibility to recover the money and you need have no further involvement in the matter, whether or not the debt collector recovers the money owed.

Court action (money claim)

It may be bringing a money claim against the debtor is the best option for you. There is no minimum amount you must claim for in the County Court, but the need to incur legal fees mean you must ensure the debt is one that is worth pursuing.

If you succeed in obtaining a judgment from the court, you can take enforcement action against the debtor to get back the money owed. This might be by means of an attachment of earnings order or charging order or, more commonly, through instructing a bailiff or High Court Enforcement Officer (the latter for where the Judgment sum is for £600 or more) to go to the debtor’s home and collect the debt or seize goods equal to the worth of the debt.

The County Court judgment will also be put on record against the debtor, which will affect their ability to get credit for a number of years.

You typically have up to six years to bring a court claim, after which you will generally be barred from pursuing the claim under the Limitation Act 1980.


In an ideal world, you would have a signed contract that outlines how much money is owed, along with details of when it should have been paid off. However, if no such written agreement exists, you should gather as much evidence as you can to prove your claim. This might include:

  • unpaid invoices;
  • cheques that have bounced;
  • communications such as emails, letters, or texts which show you have been chasing the debt;
  • bank payments;
  • witnesses;
  • evidence such as bank statements which would show details of your income and savings, hopefully backing up your assertion that the money was a loan not a gift; and
  • account history.

Bank of Mum and Dad

It is becoming increasingly common for parents to give or lend their children money to help them onto the property ladder. If this is something you want to do, it is wise to take legal steps to protect your investment, particularly in case your child is married or in a relationship with somebody and they divorce or separate. Understandably, you may not want your money ending up in the hands of your son-in-law or daughter-in-law as part of a divorce settlement.

There are a number of ways to protect your investment, including:

  • taking out a charge over the property, which would be registered at the Land Registry and provides proof that you have a legal interest in the property;
  • having a loan agreement drawn up which details how much money was lent and when you would like it repaid;
  • a nuptial agreement between your child and their spouse which specifies that the money you gave them should be repaid to you in the event of divorce; or
  • a declaration of trust which names you as the provider of the funds, thus providing evidence that the money should be returned.

If none of these options have been taken and there is no written agreement between you and the divorcing/separating couple, the funds provided may end up as part of the assets to be divided as part of the divorce settlement or separation agreement – unless you can show you have a beneficial interest in the property by means of an implied trust.

Gifts you want to get back

The legal definition of a gift is ‘the voluntary transfer of property from one individual to another made gratuitously to the recipient’ – in other words, you were happy to give the gift and expected nothing in return. If you made a gift on this basis (as most gifts are given) it is unlikely you will be able to recover the gift. The only time you might be able to recover a gift is if it was given with conditions. So, if for example, you gave your child money to serve as a deposit on a house and the money was not used for this purpose, you would have grounds for reclaiming the gift.

How we can help

If you want to reclaim a debt, it is a good idea to seek advice from a specialist solicitor as soon as possible. They will outline all your legal options and advise you on the best course of action.

They can deal with all negotiations with the debtor so that you do not have to, recommend an experienced mediator, or deal with all the paperwork involved in making a statutory demand, or take all the steps needed to win your case in court if necessary.

For further information, please contact Luke Edwards in the dispute resolution team on 01733 882800 or email [email protected].

Luke Edwards, Solicitor

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