Debt Collection & Enforcement - The 'cost effective solution'
So… You find yourself on the wrong side of an unfortunate business agreement. Money is owed to you. You try to negotiate, but the other side
is either unwilling to be reasonable or even to negotiate at all. In realistic and commercial terms, what are your options…? The good news is that with the right professional legal help, and the assistance of a new Act of Parliament, the Courts now have substantial and effective powers which can force the other side to pay. This is a very brief overview of the process, and some of the many methods of enforcement available.
Initially, ‘litigation target research’ needs to be undertaken properly at the outset of any claim: questions such as: ‘How is the Debtor actually going to pay?’, ‘How long will it take to recover the funds?’, and ‘Can I afford to wait for a particular method of enforcement?’ will reduce the chances of having a judgment against an organisation or individual that is simply unable to pay! Next, and once it is confirmed that the debtor is a sound target, the Civil Procedure Rules 1998 (as amended) require a formal ‘letter of claim’ be sent, and costs orders can be awarded for any party not following this rule – this letter details the full extent of the Claimant’s claim, the costs involved, evidence available, and any interest which is required. The debtor usually then has between 14-30 days (depending on the subject matter) to respond with proposals for settlement, a suggested mediation, or of course full payment of the debt. If no progress is made, a claim is initiated and the Courts are used to assist in bringing the matter to a conclusion, hopefully in due course, with a Judgment in the Claimant’s favour.
In theory, after the Court gives their Judgement this should bring a case to a satisfactory conclusion (for the winning party!) as unless specified otherwise in the Order, judgment debts are payable within 14 days. However, this is often not the end of the story as the winning party will still have to physically recover the money due – this is the process of ‘enforcing’ the Judgment.
The new Tribunals Courts and Enforcement Act 2007 has recently come into force, assisting the Court to bring these matters to a head more quickly and efficiently than ever before. Examples of enforcement methods include: Charging Orders and Orders for Sale – essentially, obtaining a charge on the debtor’s property, potentially with the subsequent application for an Order for Sale of that property to release the funds. New thresholds are also now in place under the Act; Attachment of Earnings Orders – obtaining payment by instalments, directly from the debtor’s employer. Provision for a new method of calculation of deductions from earnings based on fixed rates is now in force; Third Party Debt Orders – intercepting money that is already owed to the debtor, eg. by a bank; Taking control of goods – previously called ‘execution’, where [now] an Enforcement Officer takes control of a debtor’s property to be sold to discharge the debt; and Information Orders and Departmental Information Requests - the Act enables the courts to request information from the DWP and Commissioners for HMRC, other government departments and/or some third parties (including banks and credit reference agencies) to assist with the enforcement of a judgment debt.