Enforcement of Small Claims Judgments in the County Court
In my last article, I discussed the finer points of Debt Recovery and Credit Control. If followed, you should - be able to minimise your risk of bad debts and improve both turnover and profit.
However, what happens when the safety net fails and you end up having to issue proceedings against a debtor? How can you ensure that you're using the correct method(s) to recover a debt?
In the first of a two articles, I will discuss the various options that are open to you the Judgment Creditor and how they can be enforced against the Judgment Debtor.
Q. I have a Judgment that is really old, am I still able to enforce it?
Enforcement of the debt can be carried out any time after judgment has been made. However, the registration of judgment debt runs out after six years, and the permission of the District Judge is required to issue a Warrant of Execution after six years.
Q. What is the Register of County Court Judgments? Can I enforce the Judgment that way?
The Register of County Court Judgments is operated by Registry Trust Limited, which keeps a record of certain judgments against the name of your debtor. The effect of registration is to make it difficult for the debtor to get credit, e.g. a loan to buy a car or to get a mortgage.
This is not an enforcement method, but the system can alert a claimant in advance and result in payment to the creditor.
By using the Register of County Court Judgments, you can establish whether a Judgment Debtor has a history of bad debts. I once found a debtor, that I had been instructed to pursue who had five judgments registered against him in one month totalling £77,000!! A judgment debtor may decide to pay a judgment, so that it is marked as "satisfied" on the register and to help him or her get credit.
Types of Judgments which are registered include:
Any default Judgment i.e. a Judgment that has been obtained as a result of the Judgment debtor not responding to the claim. (Including a judgment on admission)
A Judgment after a hearing, which is payable in instalments
- A Judgment after a hearing, when the money is not paid and the Judgment creditor issues enforcement or oral examination (see below).
A registration is cancelled if Judgment is set aside and is marked as `satisfied' when it is paid in full. A fee of £10 is payable for a certificate of satisfaction.
Defendants are warned about the possibility of a Judgment being registered in the response pack, which they receive with the claim form (Form N1C).
Q. The debtor that I am chasing won't respond to me. Can I use an Order to obtain information from a debtor [previously known as oral examination]?
Yes, you can. This is a method by which the court can assist you in investigating the assets of your debtor. Your debtor is summoned to court to be questioned by a senior court officer or the District Judge about their assets. If your debtor is a company, a manager of the company can be summonsed to answer questions about the company's assets. If your debtor does not co-operate, the matter may be referred to a higher Judge [Circuit Judge], who can make an order for your debtor's committal to prison.
The procedure is effective in investigating your debtor's assets and the inconvenience it can cause is sometimes enough to prompt your debtor into making payment.
Q. Can I use Bankruptcy and Company Insolvency Proceedings to recover my money? This sounds very complicated. Will I recover all of my money using this method?
Bankruptcy is available for debts of £750 and over; however, it rarely results in payment to `ordinary' [i.e. unsecured] creditors. A judgment creditor [even the creditor who starts the insolvency action] is not necessarily a "preferential" creditor and must take a share in any assets with other ordinary creditors, but only after those `preferential ' creditors with security (e.g. mortgagees) have been paid and after payment of outstanding tax and the fees and expenses of the receiver in bankruptcy.
A Statutory Demand is the first step to bankruptcy against an individual and this is prepared and served without any court involvement. A statutory demand can be served as soon as the debt is due and a judgment is not necessary. If the debtor disputes the claim, he or she can apply for the statutory demand to be set aside. The bankruptcy court will halt the bankruptcy if there is any dispute about the sum outstanding. It can be relatively easy for a debtor to have a statutory demand set aside and the process can result in an order for costs being made against the creditor, so caution needs to be exercised before using a Statutory Demand.
The Winding-up Procedure against companies also starts with a statutory demand. There is no set procedure to set aside a statutory demand against a company, and if the debt is disputed, the case is argued after the presentation of the petition i.e.?
The court fees and sums payable to the official receiver by way of deposit are considerable and will deter most creditors pursuing a Small Claims judgment via the bankruptcy or insolvency route.
Q. Can a Warrant of Execution help me to get my debtors' goods sold to pay my debt?
The County Court Bailiffs can enforce Judgments up to £5,000 by the seizure and sale of your debtor's goods. Permission to issue a Warrant of Execution is needed if the judgment is more than six years old.
Unless the District Judge orders otherwise, the bailiff gives your debtor seven days notice of Execution Action. Once the seven days has expired, the bailiff attends at your debtor's premises and usually encourages your debtor to sign a "walking possession" agreement. This is not mandatory and the bailiff cannot force their way onto the property in order to gain access to the goods inside. By signing the agreement, the debtor promises not to remove the goods in exchange for being given the opportunity to find the money and clear the debt in full.
If the debt is not paid there and then, then the goods are removed and sold at auction. However, it should be noted that any of the Bailiff's and court fees associated with the sale are deducted before the remainder is paid to you.
If anyone else claims that the goods seized belong to them and not to your debtor, that person can issue what is called interpleader proceedings. As a result of this, the Bailiff cannot execute the warrant against items, such as hire purchase including cars and household furniture (e.g. sofas).
The Bailiff cannot remove any items, which the debtor needs, including vehicles, for personal or professional use or to satisfy the basic domestic needs of the debtor and their family.
Q. My debtor works for a big company in town and earns a good salary is it worth getting an Attachment of Earnings Order against him/her?
This method of enforcement is available against judgment debtors who are in employment but not against those who are self-employed. A sum of money is sent weekly or monthly straight to the judgment creditor direct by your debtor's employer. The procedure is in two parts. The court requires your debtor to fill out a form setting out details of his or her earnings and outgoings (a statement of means).
If this is not completed, your debtor can be ordered to attend court to give the information. Failure to co-operate completely in this process could result in your debtor being imprisoned.
The second part involves making the order for the employer to deduct a suitable monthly or weekly sum from your debtor's salary. The court sets a "Protected Earnings" threshold, which allows your debtor to cover his or her basic home expenses in priority to any payment to the judgment creditor.
Once an Attachment of Earnings order is in place, the judgment creditor must bring to the attention of the court the existence of the order before commencing any other enforcement steps.
Overall, this can be an effective, if often slow, method of ensuring that the judgment debt is paid.
Clayton M Coke
©2004, 2005 PRMS Ltd