Where forfeiture, or the threat of forfeiture, is not available to a client, there are a number of other options to consider when trying to enforce payment where a debtor has failed to pay a money judgment. The most appropriate option will depend on the very specific circumstances of each case and, before starting the enforcement process, it may be advisable to instruct a tracing/enquiry agent to trace the debtor’s current address and, where possible, to ascertain their worth. Where the debt relates to unpaid service or estate charges then there is always likely to be a property against which to secure or enforce the debt. However, in some cases, particularly where a debtor has no current assets or means to pay, it may make no commercial sense to incur further costs to try and recover the debt. This will need to be considered on a case-by-case basis before proceedings start. The main enforcement options, alternative to forfeiture, are briefly summarised below.

Charging Order

If the debtor owns or has an interest in a property, it is possible to secure the judgment against that property by way of a registered charge. Once registered, the charge will remain on the property until it is sold. Although the charge does not provide immediate payment nor does it guarantee payment, it is generally a prudent step to take as it does protect the debt and payment will, in most cases, follow upon an eventual sale of the property.

Order For Sale

Once a Charging Order is obtained, if the circumstances require and permit, a creditor may be able to force the sale of the property.

An Order for Sale provides the means to force the debtor to place the property on the market for sale at a price determined by the Court. Once the property is sold, the debt will be paid from any proceeds of sale after the repayment of any mortgage or other charge with higher priority.

However, the Court will only grant such an Order where it is reasonable to do so, taking account of the devastating effect it will have on the debtor. As a general rule, the value of the debt will need to be sufficient to warrant an Order For Sale. This does not strictly mean that the debt must be substantial but it does help if it is.

County Court Bailiff/ High Court Enforcement Officer

A County Court Bailiff or High Court Enforcement Officer can attend at the debtor's premises and collect the money due, or take steps to enforce payment by seizing and selling goods to the value of the debt. Any items seized must generally be sold by auction. Some items cannot be seized from the premises and if the debtor is otherwise genuinely unable to pay, the Bailiff/High Court Enforcement Officer’s powers are limited.

Attachment of Earnings Order

Where a debtor is employed and on PAYE, an application can be made to the Court for the debt to be paid out of the debtor's salary by the employer at a monthly or weekly rate set by the Court. Whilst payment by this method is slow, it can be a productive option where the debtor has no other assets. The order is only effective so long as the debtor is employed by the specific employer.

Third Party Debt Order

If you are able to establish that a Third Party owes money to or is indebted to your debtor, usually a bank or building society with whom the debtor holds an account, an application can be made to freeze the account up to the value of the judgment and have those funds paid directly to settle the judgment.

Order to Obtain Information from a Debtor

If the debtor is attempting to avoid enforcement, an application can be made to the Court for an Order that the debtor attends before a Court Officer (usually a senior clerk) to answer questions with regard to their assets and means. Armed with this information, a creditor can be more informed of their enforcement options. However, the switched on debtor will be able to avoid answering questions in such a way as to give away information of any use to a creditor.

Insolvency/Bankruptcy Proceedings

Insolvency proceedings are for the recovery of debts owed by a business/ company where the debt is for an amount over £750.00. Bankruptcy proceedings are for the recovery of debts from individuals, where the debt is for an amount over £5,000.00. An individual or business/company may be made insolvent/bankrupt if they are unable to pay their debts to this sum as they fall due.

Before issuing a Bankruptcy or Insolvency Petition, a Statutory Demand must be served on the debtor requiring the debtor to pay the sum due. If payment is not made within three weeks following service of the Statutory Demand, a Bankruptcy Petition can be issued.

This is a costly route, although it can and is regularly successful due to the very serious repercussions bankruptcy/insolvency can have for the debtor. Equally, a debtor may favour bankruptcy/insolvency where they are of limited means and under significant pressure from a number of creditors. If the debtor is unable to prevent or elects to allow bankruptcy/insolvency, the action may produce little in the way of settlement particularly where the debtor has insufficient assets to realise.

For any further information please contact Kevin Lever on 01435 897297 or Kevin.Lever@kdllaw.com.

Disclaimer

This Legal Update describes the position in law as at the date of this article and care should be taken to note any subsequent amendments to the position as set out above.  The Legal Update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.

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