It was announced earlier in the year that as of October the level of debt that an individual had to owe a single creditor before that creditor could petition for their bankruptcy was due to rise from the current level of £750 to £5,000.
Although bankruptcy is not and was not designed to be a method of debt recovery it has been used by many as an effective tool to recover from those who can pay but won’t pay.
The question for many small businesses and sole traders is where they go now. Court fees have risen, although if the debt owed is less than £10,000 the fees were unaffected. As of October if an individual owes you more than £750 but less than £5,000 it is likely that you will now have to go to Court and obtain a Judgment.
When considering any Court action for debt recovery it is vital to consider the prospects of recovery, as well as the strength of your case. A strong case without a good prospect to make a recovery is not one that ought to be proceeded with.
Assuming that you have established that the debtor has the ability to pay, what next after obtaining a judgment? Unfortunately more and more it is the case that enforcement action will be required, there are a number of options: attachment of earnings, charging orders, third party debt orders and enforcement by a bailiff or High Court Enforcement Officer.
Attachment of Earnings Orders can work well if the debtor is employed, however the amount being paid each month is set by the Court and it may not be as much as you hope.
Charging Orders are ideal for creditors who are prepared to wait for their money. The debt is only repaid when the house is sold although should the debtor be made bankrupt before the house is sold you will have priority over the unsecured creditors assuming the house sale generates sufficient equity to repay the prior charges secured and your debt.
A third party debt order to be effective requires that on the date of enforcement there are funds in the account being enforced against.
Instructing a Bailiff or High Court Enforcement Officer to take direct action to seize the debtor’s property is, as has been seen on television, a popular choice with some creditors given that the costs are recoverable from the goods seized and its perception as being a no nonsense approach sending a clear message to other creditors who can pay but won’t pay.
No matter how many debts you are owed when it comes to taking action choosing the right adviser is crucial. Debt Recovery and Litigation are not the same. We have a specialist Debt Recovery Department where matters can be dealt with on a fixed fee basis or an hourly rate. It is about the right person conducting the litigation, giving you the right advice.
By Darren Stone