Different recovery options

By David Carter on

There are several options available to creditors, with the best fit being dependent on the circumstances of each case.

enforcement recovery options

Options for company debtors

Where the debtor is an organisation, your options include:

  • Third party debt order
  • Winding up petition
  • Judgment enforcement

Third party debt order

If the debtor has money being held by someone else – their bank perhaps, or a customer who owes them money – the third party debt order authorises the payment of the judgment debt directly to the creditor. However, the money has to be available at the precise moment that the order is enforced, otherwise the creditor gets nothing and has no further recourse.

Winding up petition

This is an application to the court to close the company. It is also known as compulsory liquidation. The creditor must be owed £750 or more and be able to prove that the company cannot pay. The petition must be advertised at least seven days before the hearing in the London Gazette. If the petition is granted, bank accounts are likely to be frozen and a liquidator is appointed to realise assets and distribute amongst creditors.

It is quite expensive – there is a £280 court fee and a £1,600 petition deposit to manage the ‘winding-up’. There might also be solicitor fees for a company and the funds available for distribution may only amount to a few pence in the pound.

Judgment enforcement

Once the County Court judgment (CCJ) has been awarded, if it is for £600 or more it can be transferred up to the High Court for enforcement by a High Court Enforcement Officer (HCEO) under a writ of control. The writ authorises the HCEO to take control of assets belonging to the debtor to sell to recover the debt. It also allows the HCEO to take control of the goods, leave them in situ while the debtor pays in instalments, allowing the HCEO to return to remove the goods if the arrangement is broken.

County Court Bailiffs (CCB) can also enforce CCJs up to a value of £5,000 under a warrant of control. They do tend to take longer to attend and their recovery rates are not as good as HCEOs, primarily because they only work office hours and are paid a salary rather than by results, unlike HCEOs.

Options for individual debtors

Your primary options in the case of an individual debtor, including a sole trader, are:

  • Attachment of earnings order
  • Charging order
  • Bankruptcy
  • Third party debt order
  • Judgment enforcement

The third party debt order and judgment enforcement are the same process as is detailed above for companies.

Attachment of earnings order

In April 2016, the processes for charging orders and attachment of earnings applications changed as a result of centralisation, with responsibilities devolved to court officers.

Once the CCJ has been awarded, the creditor can ask the court to order the debtor’s employer to deduct an amount from their wages. The case officer will calculate the PER (protected earnings rate) and the NDR (normal deduction rate). We understand that deductions are now being made monthly, rather than weekly.

If the debtor loses their job, payments will cease while they are unemployed. If he changes employer, you will need to start a new application.

Charging order

This is an application to court to have the sum owed (plus interest and costs) paid when the debtor’s fully or partly owned property is sold. You can check both the ownership of the property and whether there are other charges against it with the Land Registry.

All joint owners and other secured creditors, including the mortgage lender, must be served with the application for the order. A charging order can also be made against shares.

You can ask the court for an order for sale, to avoid having to wait until the debtor decides to sell, but they can be difficult to obtain. However, you can also transfer the judgment to the High Court and enforce against other assets under a writ of control, at the same time as having a charging order in place.

Bankruptcy

Similar to a winding up petition against a company, this is a petition to make an individual bankrupt. Since October 2015, the creditor must be owed a minimum of £5,000 before you can start this process.

You don’t need a judgment. You issue a statutory demand giving them 21 days to pay in full and, if they don’t pay, you then issue a bankruptcy petition (this must be done within four months of the statutory demand). The threat of bankruptcy can often be effective.

If the debtor is made bankrupt, an appointed receiver will realise their assets to pay creditors. Secured creditors will be paid first, meaning that you may receive little or nothing.

David Carter

David is the CEO of The Sheriffs Office.

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