Businesses often need to chase payments from clients or companies that haven’t settled their dues on time. Overdue invoices, which are also called overdue accounts, have become a common practice. It is referred to as recovering a debt. The inability to recover debts can severely impact the financial health of a company, specifically its cash flow, resulting in reduced growth opportunities and increased costs.
LBA is a critical pre-litigation step that formally illustrates the details of the demand payment, debt, and notifies the debtor of the intended legal effects of non-payment. The purpose of this article is to outline the basic advantages of sending an LBA during debt recovery. More than just fulfilling a legal obligation.
What Is a Letter Before Action?
A Letter of Claim, often called a Letter Before Action (LBA), is basically a final warning you send to someone who owes you money before taking things further, before a creditor takes a claim to court based on the assumption that a court action to recover a debt would be justified. LBA is a tactical document that serves as a window of opportunity to resolve the dispute without court intervention, and strengthens the creditor’s case should litigation become unavoidable.
To ensure better clarity and provide the debtor with all the necessary information, an LBA will include the following details:
- The sum of the total amount owed
- A complete accounting of the debt, which serves as a principal summary which is augmented with interests, fees, and other charges.
- The document related to the invoices for the debt
Deadlines: An LBA sets a specific time limit for the recipient to act. If you are willing to miss this deadline, then you will be giving the sender the right to proceed with legal action.
For an individual, when the debts are owed by individuals in the UK, the Pre-Action Protocol for Debt Claims generally requires a response time of at least 30 days.
Consequences of ignoring the formal letter: Ignoring an LBA does not make the debt go away and carries significant risks for the recipient.
- Legal proceedings are initiated
- Default judgment
- Enforcement action
- Bailiffs
- Attachment of earnings order
- Charging order
- Damage to the credit rating
- Higher costs
For businesses seeking thorough guidance on issuing a letter before action, Summit Law offers clear instructions and legal insights.
Advantage 1
An LBA can prove to be effective in getting the other party to negotiate and facilitate a settlement as the last option. Therefore, all the options should be explored first to resolve the legal dispute amicably. It is important to be clear and articulate the legal and financial aspects bearing on the other party.
The structure and formality of an LBA send a clear communication that the informal collection process is over, and legal action is the next step. If there are any vague or informal reminders, which include automated calls or casual emails. As a result, they lack the emphatic impact of an LBA because they are easily ignored and carry no immediate legal weight.
Advantage 2
LBA encourages dialogue and settlement without immediately harming working relationships due to its professional, structured, and legally compliant nature. Not like the aggressive or demands that are informal, this uses a measured tone to signal the seriousness of the claimant, at the same time, it also fulfils the court-mandated obligation to seek a resolution before resorting to litigation.
Advantage 3
Under the CPR, the UK legal system makes it mandatory to issue an LBA, which can include punitive financial provisions on the other party as a settlement. An LBA can prove to be punitive in certain aspects, which is why it is important to issue them with great caution.
Advantage 4
In debt matters, a letter before action serves as an opportunity to present your defense before any formal legal proceedings begin. The letter should cover the amount overdue, basis, contractual/assignment, statement of the account, its summary, and payment history, plus the supporting documents. The last item is optional. The account statement and payment history should be marked-up documents with payment invoices.
This is a set of documents whose presentation will reinforce a claim. The above set of documents strengthens a set of documents called the offer. It suggests terms whereby a party wants to have a chance to suggest means of payment and have a chance to engage in the resolution of a dispute, means proportionate ADR. The claim documents were submitted to the court, and county court receipts reached record levels in Q2 2025. A complete set of relevant documents clarifies.
Advantage 5
LBA is planned to be a catalyst for an early engagement. By accepting alternative dispute resolution (ADR), responses, or negotiation, it designates a formal opportunity for both parties to resolve the dispute.
Advantage 6
Essentially, an LBA serves not just to preview a possible court filing, but also to succinctly summarise the facts, issues, evidentiary support, legal theories, relief sought, and proof of the plaintiff’s standing and jurisdiction in a manner that makes a convincing argument as to why the court should grant the relief requested.
Conclusion
An LBA lets the claimant build a second layer of evidentiary support that goes beyond the initial claim. By doing so, the LBA itself also acts as the very first piece of evidence in a chain that documents a series of assertive actions to recover the debt and the Grand Court’s backing approval on it.
