Debt Collection, Recovery & Enforcement
Hi I'm Alison Leith I'm a partner and I run our debt collection department. Debt recovery can be frustrating and time consuming, but much of that frustration and extra work can be avoided by putting the collection of your debts into experienced hands. In the current economic climate you can ill afford to take on bad debt. Cashflow will be affected and if left unchecked and unmanaged could ultimately cause irreparable damage to the business. The good news is that we can offer a fixed fee debt recovery service, providing you with the peace of mind that your debts will be actioned and not overlooked.
We can offer advice and assistance regarding all aspects of debt recovery, from sending initial letters to debtors to obtaining a Court Judgment for the outstanding amount.
Once Judgment has been obtained, this does not automatically mean that the debt will be paid.
We can also advise you on practical ways in which a business can minimise its bad debt, and maximise the amount you can recover through legal action.
So, you have been to Court and got Judgment against the debtor, but its not simply the case of sitting back and waiting for the money to come in. Obtaining judgment was the easy part! The Court does not automatically enforce its judgments, or even help decide how they should be enforced. It is up to you to enforce the debt, which unfortunately usually involves additional time and expense. Whether your debtor has the means to pay your debt should have been investigated at the beginning, but in any event, you need to know the debtor’s whereabouts and what assets he has got to make all this worthwhile.
One way of discovering your debtors assets is to hire a private investigator, though this can prove costly. Alternatively, you can make an application to the Court for oral examination / Order compelling the debtor to attend for questioning. Upon oath the debtor is examined about his income, expenses and assets. Based upon this information you can either agree proposals for payment, or if the debtor refuses to pay then you can decide which methods of enforcement you wish to pursue. You can pursue more than one method at the same time.
Third Party Debt Order
Where a third party owes money to the debtor, the Court can order that the money is paid to you instead. The most common example of a third party debt order is a bank or building society account. The Court can order that the account is frozen until you are paid the money that you are owed. This is often useful for enforcing against debtors whose whereabouts are unknown as they usually contact you and offer to pay when they realise they cannot access their money! In order to use this method of enforcement, there must be a bank account in the debtor’s sole name and you need details of the account, such as account number, sort code and branch. This information can be found on cheques and therefore it is advisable to photocopy any cheques received from debtors as a matter of course, before paying it into the bank. Just in case!
Instructing Bailiffs/High Court Enforcement Officers
If the debt is less than £600.00 then County Court Bailiffs are instructed to seize the debtors goods, subject to certain exemptions, in order to sell them and pay your debt and also the costs of enforcement. High Court Enforcement Officers can be instructed if the debt is over £600.00 and are more proactive than County Court Bailiffs. The Bailiffs and Enforcement Officers cannot force entry into a debtor’s property or take goods from a debtor’s person, but will often take “walking possession”.This is where the Bailiffs agree not to remove the items and the debtor agrees not to sell them, to give the debtor the opportunity to pay the sum due.
Attachment of Earnings
This order makes the debtor’s employer make regular deductions from the debtor’s earnings and pay them to the Court. Obviously, for this method to work, the debtor needs to be employed and has to owe at least £50.00. The County Court is the only court who can make this order.
If the debtor owns their own property, whether on their own or jointly, then you can register a charge against the property to show that you have an interest in the sale proceeds. However, you will not receive payment until the property is sold, although you can apply for an order for sale of the property.
Bankruptcy/Winding Up Petition
If the debtor is unable or unwilling to pay as they have no money then you can issue insolvency proceedings against the debtor. The first step is to serve a Statutory Demand which is a formal demand for payment. This is served upon the debtor personally and if you have not received payment within 21 days then you can present a bankruptcy petition (individual) or winding up petition (company) to the Court who will make the Order. A trustee is appointed to gather together all the assets and distribute them to the creditors, however, it is usually the case that there is not enough money to pay all the creditors and therefore everyone receives a certain number of pence in the pound. Issuing insolvency proceedings can be very expensive and time consuming and may end up costing you money whilst other creditors benefit.
Which enforcement method you chose obviously depends on the individual circumstances of the debtor. Sometimes it is worth instructing an enquiry agent at the outset to investigate the debtors assets and help decide which method of enforcement to use. It could also save time and money in the long run if you discover that the debtor has no assets which to pursue, before going to the time and expense of issuing Court proceedings.