What are your enforcement options?

So, you’ve “swam the channel”, issued a proceeding and, most importantly, WON the action against your opponent.

It’s now time to collect.

You have a court judgment for a sum of money in your favour; however, the true value of the court judgment is in the ability to use it as a tool to extract the cold, hard cash from the debtor. Believe it or not, this is not always a straight-forward exercise – common tactics for avoiding payment include your classic ducking-and-weaving, pleading poverty, and simply refusing to pay.

This note sets out a brief summary of the buffet of enforcement options at your disposal in England and Wales.

Bankruptcy

Bankruptcy is a formal individual insolvency procedure that is intended to grant relief to the bankrupt and, importantly, fairly distribute their asset realisations among their unsecured creditors.

Pros	Cons
The threat of bankruptcy may be useful for obtaining payment from judgment debtors who do not wish to become bankrupt (e.g. professionals, company directors).  It can be particularly effective if the individual has a professional obligation not to be made bankrupt in order to carry out his/her job.	The courts have discouraged the use of insolvency procedures as a debt collection exercise. Bankruptcy petitions can only be issued in the case of debts over £5,000. Secured or preferred creditors take priority to the judgment creditor.

 

Company liquidation

Compulsory liquidation is also known as winding-up by the court. After an order placing the company in compulsory liquidation, an independent insolvency practitioner (known as the liquidator) gathers in and realises or liquidates the assets of a company before distributing the proceeds to the company’s creditors and members in the prescribed order of priority.

 

Pros	Cons
The threat or commencement of winding-up proceedings can result in the debt being recovered quickly. The liquidator has wide-ranging powers and may bring legal proceedings to maximise the assets available for distribution amongst the company’s creditors.	The courts have discouraged the use of insolvency procedures as a debt collection exercise. Only a modest proportion of the debt may be recovered if there are other creditors.

 

Charging Order

If the debtor is the legal owner of property such as a house or land, it is possible to secure your judgment against the asset. A charging order prevents the debtor from selling their asset without first paying what they owe you.

Pros	Cons
Judgment creditor can wait before enforcing a charging order by seeking an order for sale. If property prices are dropping, it may be sensible to wait for them to rise again. Interest continues to run on the sum secured from date of judgment to receipt of final monies.	A slow method of enforcement- three stages – application for interim charging order, application for final charging order and order for sale. Not likely to be effective if there is not substantial equity in a property or if the property is jointly owned or occupied by others than judgment debtor. Other creditors may take priority.

Warrant of Control

A Warrant of Control authorises enforcement agents to attend at the judgment debtor’s home or business address to collect the money owed or to take goods to sell at auction.

Pros	Cons
Often the quickest way of getting payment of a judgment debt. Simple and straightforward procedure.	Will only work if debtor has enough goods which can be sold at auction to meet the judgment debt and enforcement officer’s charges or, alternatively, enough money to pay judgment debt.

 

Attachment of earnings order

An attachment of earnings order means that a proportion of a judgment debtor´s earnings will be deducted by their employer and paid to the judgment creditor until the judgment debt is paid.

Pros	Cons
Inexpensive and relatively straight-forward method of enforcement. Automatic deduction from wages so does not rely on debtor making payment.	Often not very satisfactory method of enforcement. Low payments often ordered. Debtor needs to be in paid employment.

 

Third party debt order

A third party debt order is a method by which sums owed to a judgment debtor that are in the hands of a third party (for example, a bank with whom the judgment debtor has a bank account) are frozen and seized for the benefit of the judgment creditor.

Pros	Cons
Can take effect relatively quickly. Ensures that a debt is paid in cash.	One of the least used methods of enforcement. The evidence to support an application (that the debtor is owed money by a third party/has a bank account and details) can be hard to find.

 

Deciding which of these enforcement tools is appropriate for you will depend on your circumstances – and you ought to give careful, strategic consideration as to which is likely to be the most efficient and effective.

For more information on how we can assist you to enforce your court judgment or, more generally, recover monies owed to you, contact Tom McCue on 0161 667 3686 or tom@prosperitylaw.com.