IT IS A COMMON MISCONCEPTION THAT JUDGEMENTS ARE AUTOMATICALLY ENFORCED. THEY ARE NOT.
There were 29,589 individual insolvencies in England & Wales in Q4 2022, 1,660 more than in the previous quarter and 7.1% higher than the level in Q4 2021. In November 2022 the average credit card debt per household stood at £2'290, the average UK household debt rose to £65'914 and the total unsecured debt per UK adult in December 2022 stood at £3'914. In view of the rising levels of debt and increasing insolvencies, this article aims to provide guidance as to the enforcement options available to creditors owed a <£5000 debt.
INTRODUCTION
In civil litigation, should you be successful then unless you have sought an alternative remedy such as specific performance you 'the Judgement Creditor', will have received a Judgement or Order requiring payment of money by a specified date.
However, while the starting presumption is that the court should assist the judgment creditor to recover the debt due in the event that this money is not paid then the law requires the Judgement Creditor to take enforcement steps against the ‘Judgement Debtor’. There is no automatic enforcement of Judgements or Orders.
There are various methods of enforcement listed in CPR Part 70 (together with some that are not). A Judgement Creditor may use any of these methods individually or simultaneously but the most suitable will depend on the facts of the specific case.
ENFORCEMENT METHODS
For a debt of <£5000 the following options are available:
A Charging Order over the Judgement Debtors assets
Transfer the Judgment to the High Court and obtain a Writ of Control or;
A County Court Warrant of Control to take control of the debtors assets or goods.
An Attachment of Earnings Order where a portion of the debtor's salary is used to pay the judgement in full.
Third Party Debt Order when there are sums owed that are in the hands of a 3rd Party (i.e. A Bank).
An Order to Obtain Information whereby the debtor is summoned to attend court and account for its assets.
Insolvency Procedures such as bankruptcy are not strictly a method of enforcement. Rather, they are a collective means of gathering in all the assets of the insolvent estate and distributing them equitably amongst all the creditors. Regretfully however, it is a commercial reality that some debtors will not recognise the obligation to pay their debts unless taken to the brink or beyond into insolvency.
CHARGING ORDERS
A Charging Order is a court order which place a charge over the assets of the judgement debtor such as land or securities to the extent of the amount of the judgement including interest and costs (‘the asset’). This means that should the asset be sold, the proceeds of the sale will go towards satisfying the Judgement Debt.
However, a Charging Order in itself, does not realise the funds. For this, an order for sale is required. Consequently, a Judgement Creditor can either wait until the property is sold, accept an instalment arrangement, apply for an order for sale or take alternative enforcement action:
ADVANTAGES OF A CHARGING ORDER | DISADVANTAGES OF A CHARGING ORDER |
|---|---|
The debt is secured and consequently, you are a secured creditor. In the event the debtor is adjudged bankrupt you will recover your money should the asset be sold. | You will not receive your money without the sale of the asset. |
Certain costs incurred are added to the judgment debt. | However, the court is unlikely to order the sale of an asset for below <£5000 |
May result in a realistic repayment arrangement | Should there be negative equity in the asset then you are not secured and the Charging Order is meaningless. |
Once the Charging Order is made final you can apply for an Order for Sale | |
Negative equity in an asset would make a charging order redundant and to avoid this, a judgement creditor should undertake:
1. Searches at the H.M. Land Registry to confirm how many prior charges or restrictions are registered.
2. When and the price it was purchased.
3. Online house price comparison sites.
TAKING CONTROL OF GOODS
Providing that the Judgement Debtor has assets, e.g. is self-employed, then taking control of the debtor’s goods using a writ or warrant of control is a good option.
Under this method of enforcement, the judgement creditor should issue either a High Court Writ or a County Court Warrant of Control. These command either a High Court Enforcement Officer or a County Court Bailiff, to seize and sell the debtor’s goods to satisfy the judgement.
A County Court Bailiff can only be instructed for debts up to £5000. For anything higher than that, then a High Court Enforcement Officer will need to be instructed pursuant to a High Court Writ but, a HCEO can be instructed for anything as small as £600.
The current procedure for taking control of a judgment debtor's goods to sell them and apply the sale proceeds in discharge of the judgment debt is that set out in TCEA 2007, Sch 12 and Pt 3 (together with their accompanying regulations), which came into force in April 2014.
The following applies to both High Court Writs and Warrants of Control:
ADVANTAGES | DISADVANTAGES |
|---|---|
Costs added to the judgment. | Cannot seize the tools of trade |
Officer has face to face meeting with debtor. | Costs of removal and sale of assets seized need to be considered. |
Relatively cheap with fixed costs. | Only successful if goods available or debtor has ability to pay by instalments. |
More likelihood of an instalment offer being made. | Notice must be given of impending enforcement. |
No expiry day if paying by instalments. | |
Information from neighbors about your debtor and the area relayed to you. | |
The following applies to both High Court Writs only:
ADVANTAGES OF A WRIT OF CONTROL | DISADVANTAGES OF A WRIT OF CONTROL |
|---|---|
Can be used for County Court money judgments of £600 or over and must be used for judgments of £5,000 or more (save for Judgments under an agreement regulated by the Consumer Credit Act 1974 which must be enforced by a warrant of control) | Abortive fee charged |
You have a choice of HCEO as these are private companies that operate under a license. | Cannot be used for Judgments under an agreement that is regulated by the Consumer Credit Act 1974. |
HCEO reports are more detailed than those supplied by a County Court Bailiff. | They can be slow depending on how much work they have on. |
Most HCEOs will arrange the transfer of the judgment from the County Court to High Court if you ask. | |
HCEOs are not directly employed by the state and so, the more onerous provisions of the Human Rights Act do not apply. | |
The debtors motor vehicle is generally the Enforcement Officers preferred asset to seize and sell when dealing with an individual. Accordingly, should the Judgement Creditor know the make, model, registration number it would be wise to inform the enforcement officer.
ADVANTAGES OF A WARRANT OF CONTROL | DISADVANTAGES OF A WARRANT OF CONTROL |
|---|---|
Fixed Costs are very low. | The application of the HRA 98 means that should someone answer the door and simply say that the debtor does not live there anymore, they are legally obliged to just accept it. |
No abortive fee should no recovery be made. | |
Do Not Fall Into the Trap of Negotiating with the Debtor after the instruction of the HCEO. Firstly, what they owe you has already been decided by the courts. The time for negotiation is over. Secondly, should you agree a full and final settlement with the debtor then you may find yourself liable for the HCEO costs.
ATTACHMENT OF EARNINGS ORDERS
An Attachment of Earnings Order (an AEO) provides that a proportion of Judgement Debtor’s earnings is deducted by their employer and paid to the Judgement Creditor until the Judgement Debt is paid in full. The basis of the deduction is guided by set rates applied to the Judgement Debtor’s resources and for obvious reasons, is only available against individuals.
An AEO is a popular method of enforcement as it is inexpensive and fairly easy to do. The automatic deduction from wages means that the Judgement Creditor does not have to rely upon the Judgement Debtor to make payment. However, it depends on the Judgement Debtor being in employment and it can take a long time to pay off a large judgement debt by this method. Consequently it is only useful when the debtor is employed by someone else. It is of no use should the debtor be self-employed.
ADVANTAGES OF AN ATTACHMENT OF EARNINGS ORDER | DISADVANTAGES OF AN ATTACHMENT OF EARNINGS ORDER |
|---|---|
An Attachment of Earnings Order is an easy application to complete. | Cannot be used if they are unemployed or self-employed or in the armed forces. |
The stigma of a judgement debt being known to the debtors employer may persuade the debtor to pay voluntarily. | Only applies to individuals, not corporate debtors. |
A committal order can be made if the debtor fails to file a statement of means. | The debtor may leave employment. |
Should the debtor have other judgment debts the court may order a consolidated attachment of earnings | It will not be payable where debtor’s protected earnings rate has not been achieved. |
| You would need the leave of the court to levy execution whilst an attachment of earnings order is in force. i.e. the instruction of bailiffs for other debts. |
This type of enforcement works where the Judgement Creditor is content to receive regular small instalments over a long period of time.
THIRD PARTY DEBT ORDERS
A Judgement Creditor my utilise Third Party Debt Orders when there are sums owed to a Judgement Debtor that are in the hands of a 3rd Party (i.e. A Bank).
This is a 2-Stage process whereby, an interim third party debt order is made and then paid directly to the Judgement Creditor upon the making of a final third party debt order. It can be used against, say, a third party who has had work done for them by the debtor and owes for that work such as a garden being landscaped or an extension being built. However, it is primarily used against banks or building societies who hold an account for the debtor.
ADVANTAGES OF A THIRD PARTY DEBT ORDER | DISADVANTAGES OF A THIRD PARTY DEBT ORDER |
|---|---|
The interim order is made without notice to the debtor and becomes binding on the third party when it is served on them. | It cannot be made against a joint account unless both account holders are the debtors in the matter |
When successful, payment is received quickly. | Timing of service is crucial to prevent the debtor from closing and shifting accounts. |
Even if unsuccessful payment is often made as a result of the account being frozen. | Details of the reason you believe the third party is indebted must be given. A copy of the court order would be sufficient. |
When the third party is a bank they are required to search their data base for any other account in the debtor’s name. | |
Third Party Debt Orders, are not the most popular method of enforcement as they depend on there being a Third party debt. However, they can be useful where the Judgement Creditor knows that the Judgement Debtor has a bank account into which their salary is paid.
That being said, there is nothing that concentrates the mind of a judgment debtor more than having filled their vehicle with fuel or piled a trolley high with groceries and finding their card is refused. The debtor is never expecting this type of enforcement and will often contact you to make arrangements for payment even as a result of an unsuccessful third party debt order application.
AN INFORMATION ORDER
When you have no details about the debtors assets, property or bank accounts, an application for an order to obtain information may be your best option.
This is not actually a method of enforcement but pursuant to CPR Part 71, the Judgement Creditor may apply for an Order that the debtor attend court and account for its assets, orally on oath to a court officer. Failure to comply will result in the matter being referred to a Judge whom may make a suspended order punishing a person for non-compliance.
In the event that the debtor fails to attend court as required, the court may hold the person in contempt of court and make an order punishing them by a fine, imprisonment, confiscation of assets or other punishment under the law.
ADVANTAGES OF AN INFORMATION ORDER | DISADVANTAGES OF AN INFORMATION ORDER |
|---|---|
Information can be obtained about the debtor’s financial circumstances so that appropriate enforcement action may be taken. | The court order requiring attendance has to be personally served on the debtor. This often proves difficult and therefore incurs delay and extra cost. |
If you can attend the hearing you can ask the questions yourself (if the hearing is before a court officer), and if the hearing is before a judge you must conduct the questioning. This way, you will get an overall picture of the debtor, see the proof of the answers to the questions, and can get the debtor to expand on the answers and discuss resolving the matter. | The examination is held at the debtor’s home court and therefore attendance by the creditor is often not possible. |
If you can serve the debtor they will normally attend as failure to do so means that the court may hold the person in contempt of court and make an order punishing them by a fine, imprisonment, confiscation of assets or other punishment under the law. | The debtor is entitled to receive reasonable travelling expenses to enable them to attend the hearing. |
Should you be able to attend an information hearing then it is worth doing so:
If the debtor states they have no car then you can ask whose car they were driving when they arrived?
If they say they have no bank account you can ask how their wages are paid to them?
If they say they have forgotten to bring their cheque book and do not know their account details you may be able to have the hearing suspended/adjourned pending that information being provided.
These hearings can be especially useful when dealing with self-employed persons whom do not wish to have their books of accounts examined and may make payment instead. They are also useful when they are made against directors of companies as the inconvenience of having to attend court will often prompt settlement negotiations.
HOW WE CAN HELP
Unlike most law firms, our standard retainer includes a commitment to support clients past judgement and through enforcement. Our dedication to you does not cease with judgement but until you have received your court ordered damages/compensation in full and recovered with the costs of the litigation.
Prior to commencing any litigation, we undertake a detailed search of your opponents assets in order to ensure the cost of litigation never outweighs its benefits. Thereafter, we maintain a watchful vigil over these resources so you can be secure that you will receive the money due to you.
Gavin Renwick has successfully dealt with fraudulent debtors many of whom have supplied false information to county court bailiffs, High Court Enforcement Officers and/or made false representations in the Insolvency Courts in a bid to frustrate enforcement, hinder judgement and inflict further financial pressure on their creditors. We are intimately familiar with matters concerning the conduct of the spouse and cases where the debtor has attempted to hide assets in faux-companies family run companies or through sham-divorces and fake addresses.
We have successfully advised and appeared for creditors at bankruptcy hearings. Should you require any legal advice whether as a debtor or creditor then contact us for confidential legal advice.
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