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Scottish Business Debts on the Rise

14 November 2018 Written by Stephen Cowan Category: Blog

The number of Scottish debts is on the increase. They rose by more than a third in the last quarter.

According to Registry Trust, a non-profit organisation which collects judgment information across the uk’ s jurisdiction and Ireland, 754 decrees were issued against Scottish businesses in Q3,2018 which represents a 34% increase in the same period last year. Within this increase Registry Trust were able to confirm that 44% related to companies whilst the increase in unincorporated businesses decrees rose by a mere 2%.

However this does mean that the economy is in difficulty. It may be that creditors have decided to use litigation more adroitly as a means of credit control and deciding not to wait too long to get paid. What creditors may be doing is to force the issue early by using the various Scottish litigation tools which are at their disposal.

An alternative view is that if a decree actually passes then the debtor will not have responded to paying the debt following their receipt of the service copy document demanding payment. Slow payers will usually enter into negotiations with their creditor upon their receipt of the writ in an attempt to either pay the debt in full or to enter into an arrangement to settle the debt by instalments. A failure to respond adequately to the court action will result in decree (judgment) passing which will, of course, have an adverse effect on the debtor organisation’s credit profile.

In addition many creditors, as an alternative to litigation, may choose to have a ‘statutory demand’ served on their debtor. Broadly speaking, in the event of the debtor not responding to the demand, the insolvency legislation permits the creditor to proceed with an insolvency process against the debtor, which could be either a bankruptcy or liquidation petition depending on the debtor’s status. The reason a creditor may choose this option, as opposed to litigation, is that it could work our cheaper and quicker that litigating. The disadvantage of using the procedure is that in many cases a simple denial that the debt is due will prevent any further action via the liquidation route. Should this happen then the creditor can still explore the litigation option.

Whilst the rise in decrees may not signal a problem for the economy it certainly does indicate that creditors are no doubt more willing to take court action as a means of recovering their cash.

And if it works for them then who can blame them?

For further infomation please contact Stephen Cowan on 0141 572 4251.

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