Execution of a County Court Judgment or High Court Judgment under a writ of control is, in most cases, the most effective method of recovering the debt, interest and fees. Where execution is successful, there is no cost to the creditor. However, there are times when alternative methods may be more appropriate. The key methods are:
Attachment of Earnings Order
Once you have a County Court Judgment (CCJ) against an individual debtor, you can ask the court to order their employer to deduct money from their salary. This is paid to the court, which then pays you. If the employer refuses, they can be fined. The court reviews the debtor’s income and expenditure and determines the instalment value. If the debtor changes employer, 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 available for seizure if they are unemployed. The process can take considerable time.
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 may be paid the debt plus interest 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 may get your money (eventually).
Disadvantages – the property may never be sold. You can apply for an Order for Sale from the court, but this 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 effective if there is money available.
Disadvantage – 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.
This is for use against an individual debtor for undisputed debts over £750 (this will increase to £5,000 in October 2015). 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, and the debt will need to be for £5,000 or more.
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 and distribute assets amongst creditors.
Advantage – the threat may be enough to force payment
Disadvantage – 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.