Letter before Claim for Unpaid Debt (Debt Protocol)

What is a letter before claim for unpaid debt?

A letter before claim for unpaid debt will be used by a business where an individual owes them money in England and Wales. The purpose of the letter is to warn the individual that the business intends to make a court claim in the Civil Court in relation to the debt and to provide a final opportunity for payment to be made.

What are the different types of pre-action letters for debt claims?

A letter before claim for unpaid debt is designed for use where the Debt Protocol applies. This is a procedure applicable to debt claims in the Civil Court. The Debt Protocol applies where a business (including a sole trader) is claiming debt from an individual person.

For other types of civil claims, including commercial debts (where both the creditor and debtor are businesses), different letter before claim can be used. This is because there are different rates of interest and implied terms of payment for commercial debts.

If the future claim will be made in Scotland, a letter should be sent in accordance with the Simple Procedure.

Is it mandatory to have a letter before claim for unpaid debt?

Yes, if a business intends to issue a court claim in relation to the debt owed by an individual, it is important to follow the principles set out within the Debt Protocol. A letter before claim should be sent in compliance with the Debt Protocol. The Court may impose sanctions where a party fails to comply with the Debt Protocol.

What is a debtor and a creditor?

The person who owes the debt is a debtor.

The creditor is the party that is demanding and claiming the debt (the party sending the letter).

What does assigned debt mean?

An assignment of debt involves the situation where the original creditor transfers the debt to another third party (the assignee) and the assignee then holds the right to receive the repayment of the debt. If the debt is assigned, the assignee can generally bring a claim in relation to the debt. This is done via a contractual agreement.

Who can send a letter before claim for unpaid debt?

A letter before claim for unpaid debt under the Debt Protocol should be used by a business that is claiming debt from an individual. A letter before claim for unpaid debt can also be sent from an assignee (a party that has had the debt assigned to them by a business).

What should be done once the letter before claim for unpaid debt is ready?

Once the letter has been signed and the documents have been attached, it can be sent by post. The letter should be sent on the day is signed and dated, or if that is not reasonably possible the next day after signing. The creditor may wish to send the letter in a tracked format so that it can prove the date of sending and the date of receipt.

The letter should only be sent via email if the debtor has made an express request that correspondence should not be sent via post and should be sent in this manner instead.

What documents should be attached to a letter before claim for unpaid debt?

Once the letter has been signed, a copy of the following documents must be enclosed with the letter:

• the Information Sheet - this can be found at Annex 1 of the Debt Protocol
• the Reply Form (for the debtor to complete) - this is also found at Annex 1 of the Debt Protocol
• a Financial Statement form (for the debtor to complete) - this can be found at Annex 2 of the Debt Protocol and on the Money Advice Service website.

A sender may also choose to enclose:

• a copy of any invoices or a statement of account
• a copy of the Debt Protocol rules to assist the recipient
• a copy of any relevant contractual agreement in place between the parties

What happens if a recipient does not respond to a letter before claim for unpaid debt?

If the debtor does not respond or make a payment within 30 days of the date of the letter, the creditor may then take steps to issue court proceedings.

What should a letter before claim for unpaid debt contain?

A letter of claim in relation to unpaid debt should:

• be dated
• state the amount of the debt
• state whether any interest or charges are continuing
• provide details of the contractual agreement under which the debt arose
• confirm whether the debt has been assigned (transferred to a third party) - if so, the details of the original creditor should be provided
• state why any instalments offered or paid by the debtor are not acceptable
• provide information to confirm how the debt can be paid
• confirm the correspondence address of the creditor
• include full information about any interest and charges applicable to the debt (if not shown in an enclosed statement of account)

Which laws apply to a letter before claim for unpaid debt?

Debts owed by an individual to a business are generally governed by a contractual agreement.

The Civil Procedure Rules - the Pre-action Protocol for Debt Claims (Debt Protocol) apply to debts of this nature.

The Law of Property Act 1925 governs the assignment of debts.

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