Repayment plan for client debt. What would you do?

[Freelancer001]

I'm in a difficult situation with a client who won't pay their invoices. I have no prior experience with this and would really appreciate some advice.

Here's my situation: I do freelance marketing work and I have a client who I stopped working for 12 months ago. After much hassling and chasing they still owe me £3k in unpaid invoices (about half of the total they agreed to pay me) and their last payment was 14 months ago.

A few months back they stopped answering my emails and calls completely. I've just mailed them a final notice giving them 14 days before legal action via the small claims court. They've got in contact again and offered a repayment plan of £100 per month starting in 6 weeks time.

Some more details:

• There's been no dispute about the quality of the work and their position has always been "we are going to pay you, but we're don't have the money yet"
• I asked them for a copy of their financial accounts which showed that they're only just breaking even each month (assuming they sent me their real numbers)
• A credit check showed low credit score and 2 recent CCJ for £1.5k
• The owner told me that they couldn't keep up their rent payments and they lost their business premises plus all their assets. Their website confirms that they have recently changed business address.
• Companies House shows that the Director has registered a new company at the new address (but they're still trading under the same name)

There's a few things I'm unsure about...

1. Should I accept the repayment plan and hold off on court proceedings if they keep up the payments?

2. Is £100/month a reasonable repayment plan? I don't know what a typical figure would be.

3. Would it make more sense to start the proceedings now? I gather it takes at least 3 months to do, so it might be good to get started now and I'd have more leverage with a judgement in my favour

4. If I enforced my claim and try to recover my money via bailiffs, freezing bank accounts or charging property - given what I've said above do you think I'm realistically going to recover anything?

5. Should I be worried about the new company they've formed at the new address? Are they trying to wind up the previous business to avoid paying their debts?

Any advice would be much appreciated. Thank you!

[MissFM]

Re: Repayment plan for client debt. What would you do?

Hi Freelancer and welcome to LB ,

I have a horrible feeling that your suspicions re the company's ability to pay and especially the appearance of a "new" company are well-founded.

In your shoes I would perhaps suggest that you would be willing to accept a repayment plan, commencing forthwith, provided that each director gives you a watertight personal guarantee for the outstanding sum - ie they would be personally jointly and severally liable for the repayments even in the event of the company folding.

See what others think x

[wales01man]

Re: Repayment plan for client debt. What would you do?

A Directors guarantee no way will this happen IMO reject their offer and say you will accept payment in 3 payments or legal action will be taken.
Before doing anything costing money check they have the ability or assets to pay beware of them closing this company and starting another .

[Exasperated]

Re: Repayment plan for client debt. What would you do?

I think you are correct to be concerned about the new company being registered. This is likely to be their lifeboat.

In the event that the company that owes you money becomes insolvent, it is highly unlikely that you will get anything against your debt. This is because if there are any funds left over after liquidation, the receiver will mop them all up in their fees.

In theory, directors become personally liable for the debts of their company if they continue to trade after the company becomes insolvent. There is an arguable case here that the company has been insolvent for some time because they have not been able to pay you and they have admitted this.

Whilst it would likely be very hard to ever pin a director down post-insolvency, it could be a weapon you could threaten to use. Perhaps the next step would be to return with a steeper payment plan, backed with directors guarantees, with the advice that you feel you have the right to pursue the directors individually anyway because of the evidence that you hold of insolvent trading.

It might work - but to be honest, you should prepare yourself for the worst and not spend too much time or money on this accordingly.

Ex