Last reviewed 10 September 2026
Being chased for money you do not believe you owe is unsettling, particularly when a collection agency becomes involved and the letters start to arrive weekly. The pressure is deliberate, and it often works on businesses that have a perfectly good answer.
In England and Wales, a disputed business debt is simply a contractual argument. Either the sum is due under the contract or it is not, and the question is usually about scope, quality, authorisation or an agreed variation rather than about the existence of the relationship.
This guide gives general information about handling a disputed business debt. It is not legal advice, and you should take advice on your own circumstances, especially if formal proceedings or a statutory demand have been threatened.
Respond, do not go silent
Silence is treated as acceptance in practice, even though it is not acceptance in law. A creditor who receives no reply is far more likely to escalate, because nothing they have seen suggests the claim will be defended.
A short written response that identifies the invoice, states plainly that the sum is disputed and explains why is usually enough to change the tone. Keep it factual, avoid insults, and send it by a method you can evidence.
Work out what type of dispute this really is
Common categories are: work not done or not done to the agreed standard, charges outside the agreed scope, a price that was varied and not properly recorded, an order placed by someone without authority, goods rejected on delivery, or a sum already paid or credited.
Each of those needs different evidence. Scope arguments turn on the contract and the order documents. Quality arguments turn on inspection records and correspondence at the time. Authority arguments turn on who placed the order and what the supplier was told about approval limits.
Dealing with debt collection agencies
A collection agency generally stands in the shoes of the creditor and has no greater rights. Write to the agency in the same terms, state that the sum is disputed, and ask them to refer the matter back to their client. Keep copies of everything.
Threatening letters can be uncomfortable, but a demand letter is not a judgment. Nothing is owed as a legal certainty until either you agree it or a court decides it, and a business that responds promptly and in writing is in a materially better position than one that does not.
Statutory demands and winding up threats
Insolvency procedures are not designed as a debt collection tool for genuinely disputed sums. Where a debt is disputed on substantial grounds, threatening to wind up a company can be criticised heavily, and the company may be able to seek to restrain the presentation of a petition.
This is the point at which delay becomes dangerous. If you receive a statutory demand or a threat of a winding up petition on a sum you dispute, take advice immediately rather than waiting to see whether the threat is carried out.
Partial disputes and how to handle them
Many disputes concern part of an invoice only. Paying the undisputed part while setting out clearly why the balance is contested is usually the strongest commercial position. It removes any suggestion that the whole account is being avoided and narrows the argument.
Where you have your own claim against the same party, such as the cost of correcting defective work, consider whether the contract allows set off. Some contracts exclude it, so the wording matters before any deduction is made.
Resolving it without proceedings
Before any court claim, the parties are expected to exchange information and try to resolve matters, and the court can penalise a party that unreasonably refuses to engage in a form of alternative dispute resolution such as mediation.
A structured without prejudice discussion, a mediated settlement or a documented payment plan on agreed figures resolves most of these disputes. A settlement should be recorded in writing, cover interest and costs, and confirm that the account is closed.
Key points
- Always reply in writing and say clearly that the sum is disputed.
- Identify the real basis of the dispute: scope, quality, authority or payment.
- A collection agency has no more rights than the original creditor.
- Insolvency threats over genuinely disputed debts should be taken seriously and quickly.
- Pay the undisputed part where there is one, and check set off rights before deducting.
- Engage with settlement discussions or mediation rather than refusing outright.
Frequently asked questions
- Do I have to pay while the debt is disputed?
- You are not obliged to pay a sum you genuinely dispute, but you should say so clearly in writing and keep the evidence. If part of the invoice is not in dispute, paying that part usually strengthens your position.
- Can a debt collector add fees to what is claimed?
- Only where the contract or legislation allows recovery of those costs. Where the underlying debt itself is disputed, the added charges are disputed with it, and you should say so in your response.
- What should I do if I receive a claim form?
- Respond within the timescale stated on the form. Missing the deadline can lead to judgment being entered without the merits being considered. Take advice promptly so the response is filed in the correct form.
- Can they wind up my company over this?
- Insolvency proceedings are not appropriate for a debt disputed on substantial grounds, and a company may be able to seek to restrain a petition. Because the timescales are short, this is a situation where advice should be taken straight away.
- Will disputing a debt harm the commercial relationship?
- Handled factually and without personal criticism, it often does not. Many suppliers accept a scope or quality argument once it is set out clearly with supporting documents.