Debt Recovery in 2009 The Essential Guide by Grant Shackleston Statutory Demand The primary method by which a creditor threatens a debtor with bankruptcy/winding-up proceedings. Must be a debt, and not damages. Must not be in dispute. Within 21 days of service the debtor must pay the debt or secure or compound for it to the creditor s satisfaction. If not the creditor can petition for bankruptcy/apply to wind-up the debtor. Company Debtors Statutory Demand The debt must be over 750 and immediately payable. Individual Debtors The debt must be 750 or over and unsecured. Can include future debts not yet payable if no reasonable prospect of the debtor paying. _
Form Statutory Demand Forms can be obtained from www.insolvency.gov.uk For Individual Debtors Form 6.1 debt of specific sum due now Form 6.2 debt is a Judgment/Court Order Form 6.3 debt is payable in the future For Company Debtors Form 4.1 NB the use of the incorrect form will not necessarily invalidate the statutory demand Content Statutory Demand Must be signed by the creditor or person authorised on behalf of the creditor. State amount of debt (plus any interest claimed) State consideration for it and how it arises Explain why not immediately payable and why debtor will not pay Service Usually has to be personal service Letter before Action Form Q State amount of debt Statement consideration for it/how it arises Claim for interest and costs CPR Protocol give the debtor a reasonable opportunity to respond/make proposals e.g., 21 days. NB under a duty to consider ADR No need for personal service _
Interest Letter before Action a) Contractual see your terms and conditions b) Late Payment of Commercial Debts (Interest) Act 1998 Business to Business Debts Rate of 8% above prevailing Bank of England Base Rate Can claim compensation fee too of up to 100 Applies to commercial contracts from 7/8/2002 c) Statutory s35a of the Supreme Court Act 1981 or s69 of the County Courts Act 1969 Court s discretion for what rate and what period of time- usually 8% from the first day after the date should have been paid through all the way to the Judgment date. Costs Letter before Action On claims over 5,000 can claim reasonable legal costs. On claims under 5,000 usually cannot claim any costs save fixed costs on the issue of the summons. Starting a Claim High Court or County Court High Court for debts over 15,000 M County Court any amount Small Claims section of the County Court up to 5,000 and the no costs rule applies usually. Claims of 15k or more can be commenced in either the High Court or the County Court. However the more financial substance, the more complex, the more important then it is more likely that issue should take place in the High Court. Therefore it is unlikely that simple debt claims over 15k should be started in the High Court unless the amount is very large. _
Issuing a Claim Forms can be obtained from the Court directly or its website www.hmcourtsservice.gov.uk Usually issue in your own local County Court eg, Boston County Court (NB the debtor may be able to transfer to his local Court if he lives somewhere else). Usually form N1 Form and content similar to the letter before action Fees are usually on a sliding scale and recoverable from the debtor Eg starts at 30 for a sum of less than 300 and goes up to 1,530 for a sum, in excess of 300,000 Solicitors costs - 5,000 or less can claim a small fixed fee. For more than 5,000 can claim reasonable costs if successful (NB the general rule is that the loser pays the winner s costs) Service Issuing a Claim Court usually effects through the first class post Procedure After Service The debtor has 14 days to admit/part admit/file an Acknowledgement of Service (AOS)/file a Defence. If the debtor files AOS after 14 days then he gets another 14 days to file a Defence. Early Resolution Admission/Part Admission Often debtor will make an offer of payment or will pay. If not go to ENFORCEMENT!! Default Judgment If no response from the debtor within 14 days of service. Summary Judgment This can be by application by the creditor or at the Court s own volition. If there is no reasonable prospect of successfully defending a claim and no other compelling reason why the case or issue should be disposed of at Trial. E.g. bouncing or stopped cheques. _
Enforcement of Judgment Oral Examination Bailiff s Warrant Charging Order Attachment of Earnings Order Third Party Debt Order Appointment of Receivers Transfer to the High Court Oral Examination Requires the debtor to attend Court and answer questions and provide documents as to financial circumstances. Court fee - 45 recoverable from the debtor Must be personal service of the application If the debtor fails to attend he can be served with a penal notice and runs the risk of imprisonment for contempt. The debtor answers questions on oath and provides documents. This is usually before a Court Officer, but sometimes a District Judge. There is scope for the creditor to attend and ask questions. Bailiff s Warrant Fees - 35 if Judgment is less than 125 55 if Judgment over 125 Again recoverable from the debtor. Court s Bailiffs must be used not very dynamic! _ They can seize the debtor s assets and realise usually at public auction. Some of the debtor s assets/items are protected. E.g, tools of trade, clothing, bedding and household essentials. Bailiffs cannot force entry to premises.
Charging Order Fee - 55 Can be obtained for :- land government stock stock of companies units of unit trusts The effect of the order is that the creditor becomes a secured creditor. Cc With land the charge can be registered as a caution/notice and the creditor can apply for an order for sale. Attachment of Earnings Order Fee - 65 Needs a minimum Judgment sum of 50. The Court can order that the Employer makes regular deductions from the debtor s income at source. The application is served upon the debtor and he completes a statement of means or faces the risk of a penal notice. The District Judge will not make an order unless there is sufficient means. The order is to be served upon the employer as well. There is a duty of the debtor and employer to notify the Court if the debtor loses his employment. There is a duty on the debtor to notify the Court if he changes employment. _ Attachment of Earnings Normal deduction rate (NDR) Protected earnings rate (PER) _ E.g, PER 110 NDR 15 Any week the debtor gets more than 125, the creditor gets 15. Any week the debtor gets less than 125, the creditor gets the excess over 110.
Third Party Debt Order Court fee - 55 If the debtor is a creditor of another, the Court can order that his debtor pays you the judgment creditor. E.g, debtor has a credit balance in a bank account. Third party needs to show cause why he should not pay his debt to you the judgment creditor. The Judge has a discretion. Third Party Debt Order The Court will not entertain speculative applications. Therefore you need bank details such as the branch office address and the bank account number. The creditor cannot go against the debtor s joint bank accounts unless both account holders are the debtor. The order will only bite if there is a credit balance at the time of the service of the order can always apply for a further order if subsequently account goes into credit. The bank can deduct expenses of administration of up to 55. The debtor can apply for Hardship Payment Order to meet the ordinarily living expenses of him and his family. _ Appointment of Receivers This is very complex and expensive! E.g, for a legacy due under a trust fund or _ income from a business that the debtor owns in partnership with others. C _
Transfer from County Court to High Court On Judgments of over 5,000 the creditor can register the County Court debt in the High Court. The benefits of this are as follows:- attracts interest after Judgment date the High Court Sheriffs are considered more effective than County Court Bailiffs! Injunctions The creditor can apply for injunctive relief pre and post Judgment. E.g, to restrain a debtor from improperly disposing of assets/concealing assets/moving assets abroad. Foreign Judgments There are various agreements in place so the creditor can obtain a Judgment in certain countries and then register here so enforceable as an English Judgment. E.g, EU countries, the rest of the United Kingdom and Countries to Various Treaties.
Enforcement Outside England and Wales _ NB could issue the claim outside England and Wales Need certificate of English/Welsh Judgment and then register abroad many countries agree to this. Then look to force in that foreign country! Case Study The debtor is a single man, no children, and is a teacher who lives in his own house bought on a mortgage 6 years ago. He owns a Porsche which is parked over night at his house. He has accounts at the NatWest in Spalding: his current account is usually overdrawn; and he has about 1,200 on a deposit account there. He also has some savings of around 3,000 in the Halifax in Spalding. Last year his great aunt died leaving him a legacy of 20,000, which has yet to be paid to him. He has no other debts. How could you proceed to enforce a judgment debt? Questions and discussions www.maplessolicitors.com