Enforcement of Judgment Debts

26 August 2008

Information explaining the various methods of enforcement, their availability and their cost.

Once a County Court Judgment (CCJ) has been obtained the Judgment creditor (the person who is obtaining the judgment) needs to take enforcement action against the Judgment debtor (the person whom the judgment is against) to recover monies due under the Judgment.  As a matter of practice, we always provide a copy of the Judgment to the debtor and seek their proposals for payment once the CCJ has been obtained.  If this is not successful, then enforcement needs to take place in order to obtain the money for the Judgment creditor.  There are seven different avenues that can be explored and we summarise these below.

1. Orders to obtain information from a debtor

Background 

Strictly speaking, this is not a method of enforcement as it will not directly result in you receiving money back but it does provide valuable information about the Judgment debtor which otherwise may not be available.  This is effectively an order of the court ordering the Judgment debtor or a director of the company (if a limited company) to attend court on a specific date at a specific time to be questioned by either a court officer or a judge as to the individual’s or company’s finances. The debtor has to provide (at this stage) bank statements, credit card statements, and other financial information, and give details of income and expenditure.  The form even includes a section for the Judgment debtor to make an offer to the Judgment creditor for repayment by instalments which is often beneficial to obtaining money in the long run.  The information obtained can then be used to decide which of the other methods of enforcement should be taken to be most successful.

Procedure 

Once a CCJ has been obtained an application is then made to the court and is accompanied by a court fee.  Please see our debt recovery fixed fee scale of charges for the updated court fee (this also shows our charges in preparing this for you).  Once the application has been sent to the court, the court will issue an order requiring the debtor to attend the court for questioning on a specified date.  The application also lists a warning stating that if the debtor does not attend a warrant for his arrest may be issued or committed to prison for being in contempt of court.  In practice, this will only occur after the debtor has failed to attend on at least two occasions.  Because of the penal order the order to attend court for questioning once issued by the court must be personally served on the debtor or a director of the company.  The cost of personal service will be around £100 plus VAT but please contact us for up-to-date prices.  The debtor may also seek conduct money from the Judgment creditor to cover his travel and expenses to and from the hearing.

The hearing 

On the day of the court hearing, a court officer usually conducts hearings in a private interview room at the court.  There is a standard questionnaire to be completed and unless expressly requested we do not arrange attendance on the Judgment creditor’s behalf.  As stated above, if the debtor fails to attend the hearing a further date will be made and a further order drawn with a suspended committal order attached which suspends debtors committed to prison provides he attends a further hearing.  Failing to do so will mean that he is considered to be in contempt of court and a warrant will be issued for his arrest.  Personal service of the order can often prompt the debtor contacting the Judgment creditor in order to try to avoid attending court.  It is our advice that unless the debt is paid in full before the hearing, then you should allow the hearing to take place as you have already incurred the fees in obtaining the court hearing and serving on the defendant and you will otherwise need the permission of the court to vacate the hearing.  With regards to our fees for acting upon your behalf, please see our fixed fees scale of charges.  Unfortunately, except for the court fee, the costs of personal service and our fees are not recoverable from the debtor.

2. Warrant of execution

A warrant of execution orders a County Court Bailiff to attend the debtor’s premises in order to secure goods or funds [equal] to the level of the debt.  Any debt under £600 must be dealt with by the County Court Bailiff – the maximum judgment that a County Court Bailiff is allowed to recover is £5,000.  The County Court Bailiff is an employed civil servant and does not work on an incentivised basis and therefore he has no incentive to recover the debt.  Once a warrant of execution has been made, the court will pass this to the County Court Bailiff for the relevant area that the debtor resides and the County Court will send a letter to the debtor warning that unless payment is received the Bailiff will attend the debtor’s premises to seize assets to satisfy the debt.  Should this not provoke the appropriate response, the Bailiff will attend the debtor’s premises and will attempt to take what is known as “walking possession” of the goods.  Walking possession means that the Bailiff agrees with the debtor not to remove the goods on the express proviso that the debtor will not remove or deal with them.  This then gives the debtor a short period of time in which to reach an instalment proposal or discharge the debt in full with the Judgment creditor.  If this does not happen, the Bailiff will then attend the premises, seize the goods and sell these at forced sale through an auction.  The Bailiff’s charges will also be taken out of the money recovered.  Again, except for the court issue fee and the sum of £2.25 for legal costs, no further costs will be recoverable from the debtor.

3. High Court Enforcement Officer

The High Court Enforcement Officer (HCEO) (previously known as a Sheriff) is able to take action on Judgment debts in excess of £600 acting under a Writ of Fieri Facias which is the High Court equivalent of a Warrant of Execution).  Once the Writ of Fieri Facias has been applied for together with the combined form of judgment, the court will return both forms to the Judgment creditor for this to then be placed in the hands of the HCEO.  Once the HCEO has received the sealed writ, they will immediately write to the debtor seeking payment and shortly follow this by an attendance by a HCEO.  The HCEO will then be able to take walking possession of goods in the same way as a County Court Bailiff and subsequently sell goods in order to satisfy the Judgment debt.  Because the HCEO are employed by companies they work largely on a no win, no fee basis so if they are unable to recover there is a small abortive fee to pay (currently £60 plus VAT) and no further sum is payable by the creditor.  If they are successful in recovery, then the debtor is liable to pay all of their costs including interest which will continue to accrue at a daily rate.  Because of this nature, we strongly recommend that any debt over £600 that a HCEO is used as they have a vested interest to recover sums outstanding, much more than the County Court Bailiff.

Drawbacks with using both County Court Bailiff and High Court Enforcement Officers

There are a number of drawbacks to using a Bailiff or HCEO, especially with regards to residential premises.  Neither is able at the current time to force entry to residential premises and unless they are granted access by the Judgment debtor they will only be able to seize goods which are located outside of the residential property.  Items on lease or hire purchase will also not be able to be seized and further classes of goods such as tools, books, children’s clothes and other equipment required with regard to the debtor’s business will not be able to be seized as these are expressly exempt.  The court fees are recoverable as are the fixed legal fees for the warrant (which is currently £2.25) and the Writ of Fieri Facias (£51.75).  See our debt recovery fixed fee scale of charges for the up-to-date fees.

4.Third Party Debt Orders

Third Party Debt Orders were previously known as (garnishee orders).  They are useful, if sometimes under-known, methods of obtaining money.  They are applicable where a Judgment creditor is aware that a third party owes money to the debtor (this, of course, is true in the case of a bank which is in credit).  A Third Party Debt Order, once granted, will require the third party to pay the sum to the creditor in full or partial settlement of the outstanding amount.  The banks and other financial institutions are used to dealing with applications for Third Party Debt Orders and most actually have a specified person whose job it is to deal with these orders.  Providing the account is in credit, the bank or building society, etc, is required to freeze the money to the level specified by the Judgment (plus a little for their administration costs) until a final hearing can be heard.

Procedure

An application is made to the court accompanied by a fee and the court (without notice to any other parties) may grant an interim Third Party Debt Order.  This has a return date in the future where a court hearing will take place to determine whether or not the interim order should be made final (and the funds transferred to the Judgment creditor) or whether it should be dismissed.  Attendance is required at the final hearing and this will be done by ourselves on an hourly rate basis.  If the claim involved a dishonoured cheque, this method can be very useful as payment can be obtained using the account details on the bottom of that cheque.  Please see our website for our dishonoured cheque fact sheet.  Alternatively, any details about any bank known can lead to an application – you do not need to know the account number and sort code, although this is very helpful.  It is worth mentioning that you cannot obtain payment from a joint bank account where only one of the account holders is the debtor.

5.Attachment of Earnings Order

This is only suitable where the debtor is an individual who is in employment.  An application is made to the court compelling the debtor’s employer to take from the debtor’s wages regular deductions and pay this money into court.  Attachment of Earnings Orders are dealt with under the Attachment of Earnings Order Act 1971 and are handled by a central unit of the court.  The Attachment of Earnings Order is served on the debtor as well as his employer, when served on the debtor is accompanied by a questionnaire containing the debtor’s means.  Once the debtor has completed and returned the statement of means, the court staff assess the debtor’s finances and they then grant the Attachment of Earnings Order.  There is a minimum limit that the debtor has to earn in order for this to be payable and our experience shows us that often there are high outgoings of the debtor’s which mean that the sums available to attach can be very small, as little as a few pounds per month, therefore this can result in it being a long time before the Judgment debt is paid in full.  This should be considered before making the application.  Once again, save for the fixed legal costs and a small amount deducted by the court for administrative purposes, any legal costs incurred are recoverable from the debtor.  Please see our fixed fee scale of charges for up-to-date charges and court fees.

6.Charging Orders

Where the debtor owns a property, it may be possible to obtain a Charging Order against that property.  As with an order to attend court for questioning, this is not strictly speaking a method of enforcement as this merely secures the sum due under the Judgment – it does not discharge debt by itself.  In order to discharge the debts due under the Charging Order you would need to obtain an Order for Sale.  Please contact us to obtain specific advice with regard to any merits of any claim you may have.  With regards to obtaining a Charging Order, it is first necessary to obtain up-to-date entries from the Land Registry to show that the debtor is the owner of the property.  Under the Land Registration Act 2003, the charging of properties where they are jointly owned and where only one of the owners is the debtor has become slightly more complex and we suggest that you contact us for specific advice in your case.

Procedure

The procedure is that an application is submitted to the court and they will then grant an interim Charging Order upon the owners of the property, all those who have a beneficial interest in the property and all those who have another charge over the property.  Once this has been served, this provides a date on which a hearing will take place to decide whether or not the interim Charging Order should be made final.  Once an interim Charging Order has been granted, this should then be registered at the relevant Land Registry to ensure that the security is noted.  We suggest that you contact us for specific information.  At the final hearing, the court will either grant or dismiss the application.  The final hearing (if successful) should also be registered at the relevant Land Registry.

7.Bankruptcy/Liquidation

In order to make somebody bankrupt or to wind-up a company, they need to have sums outstanding in excess of £750.  It is usual practice to serve upon them a Statutory Demand which is a formal demand for payment within 21 days.  If the Statutory Demand is unanswered, you may then issue a Winding-Up Petition (if this is against the company) or a Bankruptcy Petition (if against an individual).  We offer a fixed fee price for Statutory Demands of £150 plus VAT.  In addition to this fee, Statutory Demands which must be personally served on the debtor or a director of the company – this is around £75 plus VAT.  You should contact us for up-to-date prices with regards to the service of documents.  The biggest risk on embarking an insolvency proceedings is where the debtor has insufficient assets to satisfy the sums outstanding and there are preferential creditors and fixed chargeholders over goods which means there is insufficient assets for the unsecured creditors.  (Please note that under the Enterprise Act 2002, Her Majesty’s Revenue and Customs lost their preferential status which means that in practice this is normally only applied to company employees).  You should contact us for specific advice about this area.  The issuing of bankruptcy and winding-up proceedings can be very expensive with the court fee for issuing a Winding-Up Petition against the company currently £190 with the Official Receiver’s deposit of £665 which has to be lodged at the same time.  With regards to bankruptcy, the court fee is £190 once again and the Official Receiver’s fee is £335.  All legal costs are in addition to these sums and all work is carried out, save for Statutory Demands, on an hourly rate basis.  It is impossible for us to estimate exactly how much this will cost as it depends upon the conduct of the parties and how the case proceeds but we estimate that you should budget for somewhere in the region of £2,000-£5,000 (including disbursements) in order to wind-up a company or make someone bankrupt.  It is also worth noting that the costs of doing so are the first monies that are recovered out of the estate but of course you have to pay for them in the first instance and receive these back in the future.  We suggest that you contact us to receive specific advice as to the nature and validity of your claim and your particular set of circumstances.

There are various methods, depending upon the information held and the nature of the debtor.  This law update has been prepared to highlight some of those key issues and is not intended to be a substitute for specific legal advice on your position.  It is based upon our understanding of the law as at February 2008 and, of course, is subject to subsequent changes.  We suggest that you contact Martin Kingman, Debt Recovery and Insolvency Manager, to discuss the best way forward in your particular case.  As you can see from many of the circumstances above, save for court fees, costs of enforcement are not recoverable.

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