What are your legal options if you are owed money?

There are several reasons why someone might owe you money, it could be an unpaid loan, a gift that you want back, or perhaps the ‘Bank of Mum and Dad’ would like their cash back after a child’s relationship has gone sour.

Fortunately, although chasing a debt is never a pleasant task, there are a number of legal options open to you if you are owed money, as Emily Britton, a Paralegal in the civil litigation team with HK Law explains.

If you are owed money, court action should usually be a last resort as it can be both costly and time-consuming. There are several other routes you can try first to recover your money in a more timely, inexpensive and civilised manner.

Negotiation and mediation

Your first port of call should be to simply talk to the person who owes you money and ask for it back. If this fails and things are getting heated or the debtor refuses to acknowledge your claim, you could try mediation.

This involves you sitting down with a trained mediator who does not take sides, but merely helps you and the other party to talk through your issues until a satisfactory resolution can be found.

Statutory demand

Mediation is not for everyone – particularly if there is a lot of bad feeling between the parties. Another tactic, if the debt is undisputed but payment is not forthcoming, is to ask a solicitor to send a statutory demand.

This is a formal written demand for the money you are owed. Once the debtor receives it, they have two weeks to pay; if they do not pay, you can use the statutory demand to ask a court for a winding up order (in the case of a company) or a bankruptcy order (if the debtor is an individual).

Bankruptcy and winding up orders

You can only start bankruptcy proceedings against someone who owes you £5,000 or more and you can only apply to have a company to be wound up if they owe you £750 or more. You have four months to apply to bankrupt or wind up your debtor. If you are late, you will have to explain your reasons to the court named on the statutory demand.

If you are successful in obtaining a bankruptcy or winding up order, the debtor’s assets and finances can be seized to pay off the debt; however, there is no guarantee that the funds raised will be enough to cover the debt and other creditors may come forward with debts that take priority over your own.

Debt collector

It is possible to ‘sell’ the debt to a debt collector. They will pay you a reduced sum but this course of action takes the stress of collecting the debt away from you. Once you have sold the debt, it is their responsibility to recover the money and you need have no further involvement in the matter, whether or not the debt collector recovers the money owed.

Court action

It may be that court action is the best option for you. There is no minimum amount you can claim for in the County Court, but court fees mean you need to ensure the debt is one that is worth pursuing.

Once you have obtained a judgment from the court, you can take enforcement action against the debtor to get back the money owed. This might be by means of an attachment of earnings orders or charging order or, more commonly, through instructing a bailiff or High Court Enforcement Officer to go to the debtor’s home and collect the debt or seize goods equal to the worth of the debt.

The County Court judgment will also be put on record against the debtor, which will affect their ability to get credit.

You will usually have up to six years to bring a court claim, after which you will generally be barred from pursuing the claim under the Limitation Act 1980.


In an ideal world, you would have a signed contract that outlines how much money is owed, along with details of when it should have been paid off. However, if no such written agreement exists, you should gather as much evidence as you can to prove your claim. This might include:

  • unpaid invoices;
  • cheques that have bounced;
  • communications such as emails, letters, or texts which show you have been chasing the debt;
  • bank payments;
  • witnesses;
  •  evidence such as bank statements which would show details of your income and savings, hopefully backing up your assertion that the money was a loan not a gift; and
  • account history.

Bank of Mum and Dad

It is becoming increasingly common for parents to give or lend their children money to help them onto the property ladder. If this is something you want to do, it is wise to take legal steps to protect your investment in case your child and their spouse divorce, as you may not want your hard-earned cash ending up in the hands of your son-in-law or daughter-in-law as part of a divorce settlement.

There are a number of ways of protecting your investment, including:

  • taking out a charge over the property, which would be registered at the Land Registry and provides proof that you have a legal interest in the property;
  • having a loan agreement drawn up which details how much money was lent and when you would like it repaid;
  • a nuptial agreement between your child and their spouse which specifies that the money you gave them should be repaid to you in the event of divorce; or
  • a declaration of trust which names you as the provider of the funds, thus providing evidence that the money should be returned.

If none of these options have been taken and there is no written agreement between you and the divorcing couple, the funds provided may end up as part of the marital assets to be divided as part of the divorce settlement – unless you can show you have a beneficial interest in the property.

This would involve you showing that a constructive trust arose through express discussions between you and the couple which showed that there was an intended agreement that you would get a beneficial interest in the property. To succeed in such a claim, you would have to show that you significantly altered your position or acted to your detriment in reliance on that beneficial interest, for example, if you sold your home and gave the proceeds to your child and their spouse with the intention that you lived with them until your death.

It is always worth trying mediation or negotiation to try and claw back your cash, but if this fails, it may be possible to make an application to the family court to have yourself named as an ‘intervenor’ and ask for your contribution to be returned. This will be treated as a preliminary issue by the court. If it rules in your favour, you will be able to reclaim your money before the court makes an order regarding settlement between the divorcing couple.

Gifts you want to get back

The legal definition of a gift is ‘the voluntary transfer of property from one individual to another made gratuitously to the recipient’ – in other words, you were happy to give the gift and expected nothing in return. If you made a gift on this basis (as most gifts are given) it is unlikely you will be able to recover the gift.

The only time you might be able to recover a gift is if it was given with conditions. So, if for example, you gave your child money to serve as a deposit on a house and the money was not used for this purpose, you would have grounds for reclaiming the gift.

How we can help

If you want to reclaim a debt, it is a good idea to seek advice from a specialist solicitor as soon as possible. They will outline all your legal options and advise you on the best course of action.

They can deal with all negotiations with the debtor so that you do not have to, recommend an experienced mediator, or deal with all the paperwork involved in making a statutory demand, or take all the steps needed to win your case in court if necessary.

For further information, please contact Emily Britton in the civil litigation team on 01305 252552 or email e.britton@hklaw.uk. HK Law has offices in BournemouthBlandfordCrewkerne,  DorchesterParkstonePooleSwanage, and Wareham.

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