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Enforcing a debt – how to get what you’re owed



I’ll let you in on a secret - if you’re trying to recover money from an individual, partnership or company, getting a county court judgment against them is the easy part (and even that’s not always particularly easy). The real difficulty however is then enforcing that judgment and actually getting your money back when the debtor still refuses to pay. 

So if you’ve obtained judgment against someone recently and they still haven’t settled this, what are your options for enforcing this and making sure you actually get paid? In this article we’ll look at the different methods of enforcement available and consider some of the important points to bear in mind when deciding between them.

First, what do you know about the debtor?

The key to any successful enforcement starts with knowing your debtor, their circumstances and what assets they own. Very often this then dictates the best form of enforcement. 

Assuming you don’t already know these details from the court claim itself, there are various means by which such information can be acquired, particularly online. This includes through social media, HM Land Registry, the bankruptcy and insolvency registers or even Companies House. If all else fails though, you can also apply to court for an Information Order which then compels the debtor to disclose details of their assets and finances at a hearing. Although not an enforcement tool in itself, such orders can be especially useful and it is my experience that those debtors who don’t want their accounts or finances examined will very often simply pay up to avoid the scrutiny. 

Taking control of goods

This is perhaps the most common and popular form of enforcement given its speed and since it’s only reliant on the debtor owning assets with a monetary value. Generally enforcement is through the county court although it can be transferred up, in certain circumstances, to the high court. Once the warrant or writ is issued though, enforcement officers (either bailiffs or high court enforcement officers) attend the debtor’s address and can seize and sell the debtor’s goods to satisfy the judgment. 

It is the value of the assets to the debtor which is the important point when considering applying for such orders as the more significance these are to the debtor, the more willing they generally are to pay up and avoid losing them. One point to remember though, assets sold at auction generally fetch significantly less than what they would on the open market. This can mean the debtor might not have the assets to satisfy the entire judgment, particularly with larger judgments.

Charging orders

If the debtor owns a property, be it their home or any other land or building, a charging order might be an option. This secures the debt against that property, meaning that the judgment amount plus interest must be settled from the sale proceeds when the property is eventually sold. To all intents and purposes, such an order secures the debt, making you a secured creditor should the debtor later be made bankrupt or go insolvent. With the benefit of such an order an application can also then be made for an Order for Sale where, if granted, this would then force the sale of the property so that you can recover the debt.

Such orders need to be registered with HM Land Registry. By making you a secured creditor they are useful if there are concerns the debtor is to be made bankrupt at some point in the future. From a practical perspective however, it’s essential to ensure that there is equity in the property before applying for an order. If there is negative equity, you’re not secured and if there’s very little equity, the charge might not fully cover the value of your judgment.

Attachment of earnings orders

If the debtor is employed, you might consider an attachment of earnings order. This is an application to the county court for an order that the debtor’s employer deducts an amount per week or per month from their wages in payment of the judgment. It is for the court to set the rate to be deducted, having regard to the debtor’s take home pay and other essential expenditure.

The main advantage of this option is that it provides for an automatic deduction of wages and you’re not reliant on the debtor making the payment. On the other hand however, it can take a long time to pay off the judgment, particularly larger judgments and it is also important to bear in mind that using this option can then preclude you using any other forms of enforcement.

Third party debt orders

Although the least used form of enforcement, these can be extremely effective and can be used when you know the debtor is owed money by someone else or, more often, when you know their bank details. With these orders an application is made to the court to have the monies owed to the debtor by the other party frozen and then paid to you directly. 

Nothing concentrates the mind like having your account frozen so, consequently, such orders, particularly when made against bank accounts, can be hugely effective in getting paid. Very often I find this prompts the debtor to simply pay up and unfreeze the account before having to go to court for the final order. That being said though, they cannot be used against joint accounts or where accounts are already overdrawn.
  
Insolvency

If a debtor fails to pay a judgment then, provided the amount outstanding is more than £5,000 for an individual or £750 for a company, you can consider initiating bankruptcy or insolvency proceedings. Although the threat alone may be sufficient to convince the debtor to pay, it is important to remember that insolvency itself isn’t an enforcement tool. This is because if the application is successful, the liquidator or receiver will realise all the debtor’s assets available and divide these amongst all creditors. Depending on the level of assets and the number of other creditors, this might mean that some of the amount owing will be paid to you but, unless you’re a secured creditor, it’s unlikely you’ll recover the full amount.

Summary

Therefore, in summary, there are various options available to you to ensure that having obtained judgment, you actually get paid. The most suitable will depend on the particular circumstances and what you know about the debtor. If you feel you need any help with enforcing a judgment or want advice as to which option might be the most effective for you, please don’t hesitate to contact us at Scott Walby LLP.


Article Date: 24/05/2019

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