What if a creditor pursues legal action against my business?

Ej Dalius
Ej Dalius

If you owe a creditor money, they are within their right to remind or ‘chase’ you until you repay them. Likewise, they can also pursue legal action if those reminders go ignored. So, what can happen if your creditors have got fed up of waiting for you to repay your debts, and what can you do to minimise any fallout? 

Look out for prior warnings 

Creditors seldom take legal action without sending some sort of reminder beforehand. These reminders could be letters, phone calls, and emails to your business. If you start receiving these, it might be time to assess your incomings and outgoings to see if savings can be made, or if further action is needed. 

If you receive a letter or a phone call reminding you to repay what you owe, don’t immediately make accusations of harassment. Creditors are within their right to remind you to repay. Reminders become harassment when the calls increase past one per day, come at unsociable hours, and threatening language starts being used. It’s important to remember; if the debt is business-related, your creditors should only contact you at your place of work. Similarly, if your debt is personal, they should only contact you at your home address. 

Act before it becomes a major problem 

If you’ve ignored the phone calls and letters reminding you to repay your debts, your creditors can issue statutory demands or even court action in the form of a county court judgement (CCJ). Once one of these lands on your desk, it’s essential you pay the stated amount within 30 days to avoid it registering on your credit file. After which, it will stay there for six years and make it harder to apply for credit. Even if you don’t owe the amount specified, you shouldn’t ignore it. Instead, you should dispute it, and the judgement should contain paperwork which allows you to do so. 

What if it’s already a major problem? 

Once a CCJ is on your credit file, it opens the door to even more drastic creditor action. Even worse is when your company is insolvent, with more liabilities than assets. In which case, your creditors could send debt collectors or bailiffs, and if you owe more than £750, they could apply for a winding-up petition. If undisputed, these become winding-up orders, and freeze your company’s bank accounts—effectively making it impossible to continue trading. 

Fortunately, you can stop this happening. Several insolvency recovery arrangements exist. Some, like Company Voluntary Arrangements (CVA) allow you to repay your debts in affordable monthly amounts, while administrative processes allow for more substantial restructuring. Alternatively, if the debts are so severe that your company doesn’t have a feasible future, closing it via liquidation may be the best option. Although that might sound pessimistic and dramatic, it’s still preferable to receiving a winding-up order and being forced to close with little to no control.  


While no one likes receiving notification of legal action, especially when that action comes from a creditor, they are within their right to remind you to repay. These reminders should never include threatening language or persist through unsociable hours. If the reminders don’t work, they’ll move on to more forceful methods, which could include county court action and statutory demands. To stop the action going further—potentially ending in the company being wound up via a compulsory liquidation, you should take necessary action to either help the company recover, or close in an organised manner.