Late payment by Debtors can endanger the survival of any business and that is why our team of Debt Recovery specialists at QualitySolicitors Oliver & Co offer a comprehensive, efficient and cost effective service for clients providing value for money solutions.

Pre-action Collection

We aim to understand your business terms and conditions in detail and the wider commercial environment in which you operate. This enables us to effectively assist you in taking the best course of action, which may be negotiating a settlement in cases where it appears that the debtor does not have the means to pay you in full, or issuing County Court proceedings where it is quite clear the Debtor is simply trying to avoid payment but has the means to pay.

We may, however, suggest that we negotiate a settlement rather than incurring the costs of proceeding further. It is important to differentiate between those debtors who can pay and those who cannot, without you incurring unnecessary costs which you cannot recover. It is also important to appreciate that litigation is not always the appropriate solution to a client’s problems. Many disputes are resolved without the need to commence proceedings and even where litigation is used, most proceedings are settled before Trial.

Pre action protocols set out the steps that parties should take to provide and obtain information from each other about a claim before proceedings are issued. We will advise you of all the procedures which must be undertaken before proceedings are commenced. It is always important to comply with pre action protocols as non compliance can lead to unnecessary proceedings being commenced or to unnecessary costs being incurred.

County Court Proceedings for Debt Recovery

Legal proceedings in respect of debt recovery matters are commenced by a claim form. In all cases for business clients, QualitySolicitors Oliver & Co. consider as a matter of strategic planning and tactics whether litigation is the appropriate action for the client and, if so, how should that litigation be conducted.

One of the first considerations which must be addressed is ‘Limitation’. The basic rule for actions founded on contract is that the Claimant has six years from the date of the cause of action to commence proceedings. Depending upon the value of a claim the case will then be allocated to a particular track. There are three tracks, the Small Claims Track, the Fast Track and the Multi-Track. The route taken is decided by the Judge and depends on the complexity of the claim and the value.

The Small Claims Track is generally for lower value and less complex claims with a value of up to £5000, although there are some exceptions. The Fast Track is for claims with a value of between £5,000 and £25,000 and the Multi- Track is normally reserved for very complex claims with a value of £25,000 or more. At QualitySolicitors Oliver & Co. we can guide you through the claim process from the issue of proceedings right through to Trial.

Taking Enforcement Action once Judgement obtained

Once we have successfully obtained Judgement for our client in respect of a debt due, it is often necessary to take enforcement action against those Judgement debtors who still refuse to make payment. We advise our clients upon the most (cost) effective option available to them. The most appropriate method of enforcement depends upon the assets held by the debtor and we will advise as to the best option to take. For example if a debtor is cash rich, a Third Party Debt Order against his bank accounts may be more appropriate than a Charging Order over property.

Below is a brief outline of the Enforcement options available.

• Instructing the High Court Enforcement Officer

We often advise clients that instructing the High Court Enforcement Officer is the first and best option to take in most circumstances. It is a relatively cheap option and often means that monies can be obtained quickly. We can instruct the High Court Enforcement Officer to obtain payment/goods from the debtor by way of Warrant of Execution.

• Orders to obtain information

Obtaining Information about the debtor is not a form of enforcement. The effect of an order to Obtain Information is that a debtor is ordered to attend court and give details of assets. A debtor can be ordered to attend court to answer questions on oath and provide information about the debtor’s means and any other matter about which information is needed in order to enforce a judgment or order. This is designed to find out what the debtor’s assets are and whether or not he has transferred his assets to someone else to avoid payment. If the Debtor fails to comply with the order to attend Court or makes a misrepresentation or a material omission the judge will issue a Suspended Committal Order. The Suspended Committal Order is an order for the debtor to be committed to prison. This option, therefore, can be a way of extracting information from a debtor which can then be used to undertake some other form of enforcement action.

• Attachment of Earnings Order

If the debtor is an employee and you know the identity of the debtor’s employers, you can obtain an order form the Court requiring the employer to pay you directly a monthly amount from the debtor’s salary until the debt is satisfied. It is up to the court to decide the rate of payment.

• Third Party Debt Order

A Third Party Debt Order is an order by which a third party, who owes money to the debtor, is ordered to pay that money to the creditor in part or in full satisfaction of the judgment debt. An application for a Third Party Debt Order can be made against any third party within the jurisdiction (except the crown) but it is usually made against a bank or building society.
The procedure for obtaining a Third Party Debt Order is twofold; first by obtaining an Interim Third Party Debt Order and then by obtaining a Final Third Party Debt Order. An Interim Third Party Debt Order served on a bank or building society effectively freezes the account in the amount set out in the order. Once an interim Third Party Debt Order is served upon the bank or building society they must not reduce the amount in the account to below the amount it is ordered to retain. The Court then sets a date for a hearing at which the debtor can raise objections. At the Final hearing the Court will either dismiss the Interim Order or make an order that the third party is to pay you.

It is important to note that the third party can only pay out money which is in the account on the day the Order is made and therefore you must be certain that the debtor has sufficient funds in is account to pay the sum to you. If not, you will only receive the amount in their account at that time, which may in some circumstances be minimal.

• Charging Orders

Charging Orders are commonly used as an enforcement tool. Unlike Warrants of Execution and Orders to obtain information the use of Charging Orders has grown in popularity over the last few years. The effect of a Charging Order is similar to a mortgage. The loan (or, in this case, Judgement debt) is secured against property and paid off when the property is sold before any equity in the property is paid to the seller / debtor. A Charging Order will, however, take effect subject to any pre-existing mortgage or charge already on the property. A single Charging Order can be made to secure more than one Judgment or order against the same debtor.

The problem with a Charging Order is that there is no immediate payment for the creditor. A Charging Order simply secures the Judgment, not the debt, so that when the debtor comes to sell the property the Charging Order bites, with the effect that the creditor is paid off before any equity in the property is paid to the debtor. Without an Order for Sale there is no guarantee of when that sale might be. This would seem to make other methods of enforcement, where the money is received straightaway, far more attractive. Charging Orders are, however, a low cost method of securing the Judgement debt. Delayed payment is also compensated at a relatively high interest rate, currently 8 per cent per annum as the standard court rate.

Insolvency Proceedings

• Bankruptcy (Individuals)

Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. A Bankruptcy Order can still be made even if the debtor refuses to acknowledge the proceedings or refuses to agree to them. Every bankruptcy starts with a bankruptcy petition presented by either a creditor or the debtor themselves. For a creditor’s petition, there has to be sum of £750 or more owing to them from the debtor. Before you can make your application to make an individual bankrupt you must first take one of two steps; either serve a Statutory Demand or send in the High Court Enforcement Officer.

If the High Court Enforcement Officer fails to recover the debt due, then he will make a nil return and then the Bankruptcy Petition can be presented to the Court. If a Statutory Demand is served then the debtor can apply to the Court within 18 days to request that the Statutory Demand is set aside. If the debtor fails to do so then a Bankruptcy Petition can be presented.

A Bankruptcy Order is made at a Court hearing (at least 14 days must elapse between the service of the Petition and the hearing) or the court may appoint an insolvency practitioner to investigate the possibility of an individual voluntary arrangement (IVA) between the debtor and his creditors. A Bankruptcy Order will be entered into the public register for Bankruptcy Orders. The courts then appoint an official receiver until the bankrupt’s estate vests in the trustee in bankruptcy. The function of the trustee is to gather in, realise, and distribute the bankrupt’s estate to satisfy the creditors.

• Liquidation (Limited Companies)

This is a drastic step for a creditor to take and it is normally taken only when a creditor has pursued the debts due for a considerable period of time and it has exhausted all other avenues to recover the monies. A creditor can, however, issue a Winding Up Petition immediately. The only requirement in law is that you give the debtor company 3 clear days’ notice. The cost of this action is not insubstantial and a creditor must decide whether or not the debtor is likely and in a position to pay up under this extreme pressure.

A debt of over £750 must be undisputed and the creditor must have notified the debtor of its intention to collect the debt. It is often therefore prudent to obtain a Judgement or issue a Statutory Demand before issuing a Winding Up Petition as a Petition will only be granted where it can be proven to the court’s satisfaction that the debt is undisputed and all attempts to recover the sum due have been undertaken and the debtor has not complied.

A Petition will be issued and a court hearing date granted. Once the Petition is correctly served upon the debtor company it has a period of time to pay the debt or to defend the action. If the case is successful the company is wound up and a liquidator appointed to gather in, realise, and distribute the company’s assets to satisfy the creditors.

Before the hearing takes place the Petition must be advertised in the London Gazette. This is usually 15 days before or sometimes longer before the hearing. This action can be very prejudicial to a debtor because all high street banks and other lenders monitor the Gazette. If a company is involved in such an action their bank accounts will be frozen immediately.

The disadvantage with issuing a Winding Up Petition is that in cases where the debtor can demonstrate any dispute, no matter how tenuous, the company will not be wound up. The creditor could therefore run the risk of losing their own costs and being ordered to pay the costs of the debtor in such proceedings where they are initiated without just cause.

If you would like advice on Debt Recovery then please contact us on 01244 312306.