Don’t sue “on principle”

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Don’t sue “on principle”

don't sue just to win on principle when chasing overdue debtsTwo things to think about when chasing overdue debts,

1: don’t sue unless you’re pretty sure that the debtor has the ability or assets to pay. AND,
2: get personal guarantees for business debts wherever possible – you can always say “I can make an exception in your case” for customers that object.


I sent the email below to one of our clients. He was owed $9,000 by a business that has just gone into liquidation. I’ve included it in this blog to show you our reasoning.


… Yes, you can pursue him personally – your signed Personal Guarantee (attached) is both signed and valid.

1: send a solicitors letter with the pdf attached telling him that we’re after him personally
2: go straight for the throat and issue legal papers immediately.

The temptation will be to go for 2: The risk though is that he has nothing and may be filing for personal bankruptcy in which case you will be just another unsecured creditor – but one who has paid legal costs.
Option 2: gives you no priority.

I’d opt for #1. If he doesn’t respond, then we can call to find out his intentions and then issue papers if needs be. If he has assets personally, he’ll want to protect them. If he doesn’t, he’s a lost cause anyway.

Your call.
If you sue – it will cost but you WILL get a reaction, if you don’t you can get judgment by default. You WILL win in principle, he has no argument. The clock will be on. he must respond in 28 days.

He HAS to reply. BUT, if he has no money or assets, you will have paid to get papers served AND for the judgment by default. Money down the drain. But, if he DOES have assets, you will get some of those costs back as well as the debt + interest. It’s a gamble.

That being the case, I’d err on the side of caution (if it was my money).
* Solicitors letter – “we’re suing you” – + pdf of the Personal Guarantee.
* Decide “what next” after the 7-days of the sending of that letter to his home address.


Don’t sue “on principal”. You don’t have to “win” judgment if it’s going to cost you a fortune (in legal costs) to do so and then you don’t get paid after all that at the end!

By | 2017-09-20T10:51:00+00:00 January 13th, 2011|miscellaneous|0 Comments

About the Author:

Have you ever wondered why a client does business with you and then ignores your invoice like they had no intention of paying it in the first place or they treat you like their own personal line of credit, leaving YOU dangling, waiting months for their payment? Unfortunately this situation is all too common and can even be puzzling for the most experienced business owner. If you’ve ever had to handle outstanding accounts or you are just so over non-payers, then we can help. Real-world skills, solutions, tips & strategies to get more accounts paid on time, and, most importantly, how to maintain customer goodwill while keeping YOUR cash flow in the positive. You will find the blog posts helpful but to get real results, contact us by using any of the forms on this site, by email or by phone. I’ve been involved in the management of accounts for over 30 years, heard every excuse in the book, can spot a non-payer at 20 paces. Finance Companies in the 70s (systematic, tough), professional firms in the 80s (no systems, too gentle) and, since then, just about every other sort of business you can think of. I’ve written books on the topic, spoken all over the place about it and the blog in this website is my way of “giving back”. I hope you find it helpful.

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