Why a Letter Before Action Is Essential

When chasing a business or person for a debt, it’s usually a good idea to send a letter before action – also known as a pre-action letter – before commencing legal proceedings.

What is a letter before action?

A letter before action is a formal notice that asks for payment of an outstanding debt before any legal proceedings start. It is also known as a pre-action letter. It tells the recipient that the creditor may take legal action, and it can bring out any dispute about the debt early.

A letter before action is a formal notice requesting payment of an outstanding debt within 14 days in accordance with Part 7 of the Ministry of Justice’s Civil Procedure Rules.

A pre-action letter informs the recipient that a creditor is threatening to take legal action. If the creditor is in any way unhappy with the response, they are free to make a County Court Claim.

Why a letter before action matters in debt recovery

In many instances, it can be foolish to commence legal proceedings in the absence of a pre-action letter.

For example, the creditor’s case will weaken if the debtor can say to the court: “I’ve incurred costs having to attend these proceedings, and these costs are totally unnecessary because if I’d received a formal letter explaining the debt, I would’ve happily paid.”

Courts are usually sympathetic in such cases and may order the creditor to pay the debtor’s costs.

How a letter before action response can bring out a dispute

Pre-action letters are powerful and useful tools that can help to bring out any previously unknown disputes relating to the debt.

For example, in their letter before action response the recipient may say: “This debt isn’t due to you because it’s the subject of a dispute.” And if they are really savvy, they will utilise Part 36 of the Civil Procedure Rules, which encourages parties to settle disputes without going to trial.

Furthermore, under Part 36 rules, if one party rejects an offer and the debt claim goes to court; that party will probably have to pay the other side’s costs.

Owed money and getting nowhere?

Sources

• Practice Direction, Pre-Action Conduct and Protocols, justice.gov.uk
• Pre-Action Protocol for Debt Claims, justice.gov.uk
• Civil Procedure Rules Part 7, justice.gov.uk
• Civil Procedure Rules Part 36, justice.gov.uk

Disclaimer: Insolvency & Law Ltd is not a firm of solicitors or licensed insolvency practitioners. We do not conduct any regulated legal or financial activities as defined under the Legal Services Act 2007 or the Financial Services and Markets Act 2000. We do not offer legal advice, financial advice, debt counselling, or conduct of litigation.