When you’re chasing a debt, all you really want is to get what you’re owed, as quickly and painlessly as possible; admittedly you might sometimes want revenge, but apart from statutory interest there’s not a lot you can do to inflict pain on your debtor.
So it might seem strange to think that depending on your debtor’s status – sole trader, limited liability partnership, company and so on – there might be different things to keep in mind when attempting to recover a debt from them.
This is problematic, because – especially if you’re dealing with an individual – it might not be immediately clear whether they are registered as a self-employed individual, have a company name but are essentially a sole trader, or are possibly acting on behalf of a larger company you’re not even aware of.
When it comes to invoicing, you might get a clue from whether you invoice to an individual name or a company, or to an accounts department rather than your original point of contact’s personal email address, but it’s still not always easy to be 100% certain.
For the most part it shouldn’t really matter, but the crucial factor is whether your customer is a company going into insolvency – as this can put you at the greatest risk of being unable to recover your money.
A company that is continuing trading should remain liable for their debts, so as long as you can prove you are owed it, you should eventually get your money – and many companies will pay to avoid the negative reputational impact of being ‘named and shamed’.
An individual will remain liable for their debt even if they stop working in the same discipline, so if your customer is just a person with no registered company name or limited liability, in theory you could claim your money back even if they have to sell their house, car and other possessions to pay you.
But equally, it can be more stressful if you know you are putting an individual under considerable hardship, even if you know you are reclaiming only money that is rightfully already yours; conversely, as mentioned above, you might relish the opportunity for revenge if they have caused substantial hardship to you.
So in summary: individuals can find it harder to escape liability (although there’s always the option of bankruptcy) and the process can feel more personal; companies might pay simply to avoid negative brand publicity, but if they enter into insolvency proceedings, you can find your money is gone for good.
Call 0808 252 5993 to talk to a member of our team.