What is the difference between can't pay and won't pay’

We all have those customers who avoid paying in accordance with the terms of the contract or, who delay payment for as long as possible or, simply refuse to pay.

Donna Goddard, Head of Debt Recovery at Boyes Turner has a look at the distinctions between Can’t Pay and Won’t Pay.

Can’t Pay

These generally fall into two categories. Firstly, there are debtors who have the means to pay but have fallen on hard times for one reason or another. They are in a position to pay but simply have a lack of funds to commit so will require some assistance to repay the debt over a period of time.   

Secondly, they are debtors who have experienced a sudden substantial fall in their income due to loss of employment or, loss of a business contract or are just experiencing health problems which will impair their ability to manage their finances.  

These types of debtors fall into the can’t pay category. My recommendation is always to assist these debtors by entering into repayment plans and where possible, obtain some security.  

General opinion is that it is inappropriate to issue court proceedings against someone who has every intention to pay but unable to do so. Indeed, the Practice Direction – Pre-Action Conduct and Protocols of the Civil Procedure Rules 1998 (or Pre-action Protocols for Debt Claims in the case of a sole trader), the issue of court proceedings is stated as being a last resort. Businesses will therefore need to demonstrate that attempts have been made to reach a settlement.

Won’t Pay

Now we get onto the won’t pay category. These debtors will either have a genuine dispute and are withholding payment until the issues have been resolved or, they are working the system and deliberately deferring payment for as long as possible. Then, of course, there are the debtors who avoid payment altogether. These debtors will have a history of unpaid CCJ’s and no intention to pay.  

Most would agree that it is appropriate for creditors to take legal action against ‘won’t pays’. A creditor will need to consider the hard business approach but ensure that minimum costs are incurred for doing so.  

Our Debt Recovery team work closely with our Dispute Resolution team and can assist with collection and advice. The Debt Recovery group offer an efficient and cost effective service on standard fixed costs.