Different routes to recovering money owed
by David Carter on 05 November 2010
When you have an unpaid debt and all your collection endeavours have failed, you have a number of options available to you. As authorised High Court Enforcement Officers (HCEOs), naturally we at The Sheriffs Office think this is the best method! But we do recognise that different cases sometimes need a different approach, so here is a summary of the main options available.
Execution of a County or High Court Judgment
This can be done either by a county court bailiff or HCEO. HCEOs have more powers and do tend to recover more debt, principally because, unlike the bailiff, they do not need to give advance notice of a visit. They are also commissioned on what they collect. You can read more about this option in this article.
Advantages – a fast and effective method of recovering the debt, interest and fees. Where execution is successful, there is no cost to the creditor.
Disadvantage – if the debtor has no assets or is bankrupt/insolvent/in liquidation, there is nothing to seize to then sell to recover the debt.
Attachment of Earnings Order
Once you have a CCJ against an individual debtor, you can ask the court to order the debtor’s employer to deduct money from their salary. This is paid to the court, who then pays you. If the employer refuses, they can be fined. The court reviews the debtor’s income and expenditure and decides on the instalment amount. If the debtor changes employer, then you need to make another application.
Advantage – as long as they are employed, you are guaranteed to receive the instalments.
Disadvantages – the court may order a very low value instalment, thus taking a long time to recover the debt. If they lose their job, you have to start again and may find few assets to seize if they are unemployed. The process can take considerable time.
Charging Order
Again to be used against an individual debtor, this allows you to apply to the court for an order so that, should their property be sold, you will be paid the debt plus interests and costs if and when the property is sold. 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.
The debtor must either fully or partly own the property. It is advisable to check this with the Land Registry, as well as checking whether there are other charging orders against the property (all charging orders are registered with them once made and stay there until the debt is cleared).
Advantage – if this is the only asset available, you will get your money (eventually).
Disadvantages – the property may never be sold. You can apply for an Order for Sale from the court, but can be difficult to get. There may be a large mortgage on the property and/or, as is often the case, other charges registered against the property.
Third Party Debt Order
This is made against a third party holding money on behalf of the debtor, for example their bank or a customer owing the debtor money. You need to try to make sure there actually is some money in the bank account, otherwise this method will fail.
Advantage – if granted this can be an effective if there is money available.
Disadvantages – if the account is overdrawn, for example, on the day the order is enforced, then you will not receive any money and will have no further recourse. They can be time consuming and difficult to get.
Bankruptcy
This is for use against an individual debtor for undisputed debts over £750. You don’t need to get a judgment first; you can simply send a statutory demand giving them 21 days in which to pay in full. If they don’t pay, you then issue a bankruptcy petition (you have four months from the statutory demand in which to do this). If the debtor is made bankrupt, their house may be sold to pay the debts.
Advantage – the threat of bankruptcy may be enough to force payment.
Disadvantages – if they really are unable to pay, the threat will not work. The appointed receiver will pay creditors (secured creditors first), so there is the risk you will receive little or nothing. The cost of making a debtor bankrupt is high, likely to be in the region of £1500 to £2000.
Winding Up
This is for use against a company for debts over £750. You don’t need a judgment first, but can go straight to a statutory demand. If payment isn’t received, the next step is a winding up petition, which must be advertised at least seven days before the hearing in the London Gazette. This usually leads to banks freezing bank accounts. If the petition is granted, a liquidator is appointed to realise assets and distribute amongst creditors.
Advantage – the threat may be enough to force payment
Disadvantages – having a company wound up will cause directors inconvenience, but will not affect their personal assets (unless they have given personal guarantees). If they have many creditors chasing them, they might actually turn it to their advantage and you still don’t get paid. The cost is also high, likely to be in the region of £1500 to £2000.
© Sheriffs High Court Enforcement Ltd. Please contact us to request permission to reproduce this article.
Disclaimer: The statements and opinions expressed in this article are those of the author and do not necessarily reflect those of Sheriffs High Court Enforcement Ltd, trading as The Sheriffs Office. Sheriffs High Court Enforcement Ltd does not take any responsibility for the views of the author. The author will not be held responsible for any comments posted by visitors to this site. Please note that this article does not constitute legal advice. The author has used his best endeavours to make this article as accurate and complete as possible, but requests that the reader be aware that the law of England and Wales frequently changes. The author strongly advises the reader to take legal advice before embarking on any enforcement action.
