We are currently being bombarded by press with bad news about the economy and how inaccessible credit has become.  Although many of the headlines will be sensationalist, never the less the underlying news is not good.

• According to Pricewaterhousecoopers the average household debt has come from £17,000.

• The average student owes £7,502

• Pensioners’ bankruptcy have doubled

• [Insolvencies last year in the first quarter of 2007, the number of companies being wound up increased by 5% from the year before.

• Creditors petitions increased by 2%

• Number of debtors petitions increased by 9%

Mortgage repossessions

There were only 8,000 in 2004.

Debt has become socially acceptable.   Talk is of managing rather than paying off debt and borrowing to invest.

The current problems may be temporary but will have an impact on your business.  In the past a debtor has often been able to repay a debt by raising money on his credit card or borrowing money.  This option may not be available in the future and as we know bankruptcy does not have the stigma attached to it as it used to. 

Late Payment of Commercial Debts Legislation 2002 

As you should know, Late Payment of Commercial Debts Legislation allows businesses to claim by a high rate of interest on monies owed from other businesses.  The current rate is 8% above base rate which equates to a massive 13.75% per annum.  It is important to note that you can claim this amount even though you have not gone through the court and also that it applies in the absence of express contractual terms.  This interest is payable the first day after the final day of payment.

The interest can be perceived as a separate debt.

In addition to interest you can claim fixed compensation under the Late Payment of Commercial Debts Legislation.  If the debt is: -

• less than £1,000, you can claim £40

• £1,000 or more you can claim £70

• over £100,000 you can claim £100

Personal Guarantees

With the company winding ups on the increase time and time again companies will fold, leaving monies  owing to the creditors.  One way around this is to ask a Director of the company to sign a personal guranantee when you place an order.  This enables you to with great ease pursue a Director for the debt owed by the company.  It is often the case that a Director of a company will have personal assets to the property which means that you can recover your money immediately or at latest by means of chasing a charging order on the property.

If you have any queries please contact Jonathan Kenwright of this office.

As this information has been prepared by Maitland Walker Solicitors as a general guide, we recommend that you seek specific professional advice before acting upon the information contained within it.  No liability can be accepted by Maitland Walker for any action taken or not taken as result of this information. Maitland Walker is regulated by the Solicitors Regulation Authority