6 ways to enforce a County Court judgment
Anyone who has obtained a county court judgment (CCJ) against an individual or a company who owes them money knows that this is just part of the story. A judgment is only of value if you can recover the sum due plus interest and your costs. In this blog, I look at ways to enforce a CCJ.
In my experience, it's remarkable how keen debtors can become to pay their debts when they see an HCEO standing on the doorstep
By the time you have entered judgment, the debtor has usually had ample opportunity to either pay the debt or put forward a repayment plan. Issuing court proceedings and obtaining judgment is generally a last resort. As a CCJ can have serious ramifications for a debtor's credit rating and ability to raise finance, the threat of proceedings is often enough to encourage them to pay. If it is not and judgment is obtained, steps need to be taken to enforce it.
Six of these are set out below.
1.High Court Enforcement Officer (HCEO)
If the CCJ is for more than £600, the proceedings can be transferred to the High Court for enforcement by an HCEO. This is preferable to instructing a County Court bailiff to enforce the debt as HCEO's have greater powers. As a result, they have far better collection rates.
HCEOs are private individuals or companies authorised by the Lord Chancellor. The HCEO is incentivised to collect the debt as they take their fees from the debtor. If they don't recover money from the debtor, they don't get paid.
The HCEO will manage the transfer of the proceedings to High Court. Once this has been done they have power to enter the debtor's premises (their home or business premises) to seize goods to the value of the debt plus the cost of execution.
In my experience, it's remarkable how keen debtors can become to pay their debts when they see an HCEO standing on the doorstep. Those who are not will see their goods seized and put up for auction. The costs of the auction and storage of their goods are added to the costs.
If a debtor disappears or has no assets, then the only costs for instructing the HCEO are the £66 writ of control fee and the HCEO's fixed fee of £75 plus VAT.
2.Third party debt order (formerly called a Garnishee Order)
This is an order by the court for a third party to pay money they owe to the debtor direct to you. This is particularly effective if you know that the debtor has money in a bank account.
Once your application for this type of order has been served on the third party, they are not allowed to pay their debt to your debtor. In the case of a bank account, this means their account is frozen until the application is heard. Sometimes this is enough to encourage payment.
As you do not need to notify the debtor of this application until it has been served on the bank (or other third party), they can't take preemptive action such as withdrawing funds from their account.
3.Charging order and Order for Sale
If the debtor owns a property, you can apply for an order placing a charge on the property so that once it is sold you recover the money due to you (plus interest and costs). (This is subject to there being sufficient equity from the gross proceeds of sale after discharging any creditor who ranks in priority, legal fees on the sale and estate agent's commission.)
The downside of this type of order is that they may have insufficient equity in their property to pay you. Plus, they may not sell the property for several years unless you enforce with an order for sale application once the final charging order has been granted.
Prior to applying for an order for sale, we are required to have an external valuation carried out on the property in question. We must also obtain from any creditors secured on the property details of how much is owed to them. This establishes what equity there is and whether it is worth proceeding with the order for sale application.
This type of order can be obtained alongside other enforcement action so that you have some fallback security for your debt if other avenues fail.
4.Attachment of earnings order
If the debtor is employed, you may be able to obtain an order that part of the debtor's salary is paid to you direct by their employer. This is usually by instalments.
Sometimes the threat of this is enough to get a debtor to pay up as they don't want their employer finding out they have a CCJ against them.
5.Order to obtain information
This an order that requires the debtor to attend court to find out information about their financial situation. This will include bringing in documents such as bank statements, credit card bills, pay slips and any other documents relating to their asset, liabilities and income. They will be required to answer questions, for example, whether they own any property.
Failure to attend court for this type of hearing or answer questions is a contempt of court and can lead to a prison sentence. If they fail to attend the first hearing, a second hearing will be fixed. If they fail to attend this second hearing, the court has the power to issue a committal order/arrest warrant and order the attendance of the debtor to: (a) answer the questions, and (b) answer why they should not be committed to prison for breach of court orders.
6.Bankruptcy or winding up
If the CCJ is for more than £5,000, you can apply to make the debtor bankrupt. In the case of a limited company, if the debt is over £750 you can apply to wind up the company.
These steps are often ones of last resort because you risk recovering little or nothing at if the debtor is insolvent. In addition, you will have to bear additional costs of making the debtor bankrupt or winding up the company.
Sometimes the threat of this is enough to encourage payment.
If you would like to discuss the enforcement of a CCJ or require any advice on recovering monies owed to you, please email Mark Goldstein at [email protected].