Warning over debt enforcement

Blanchards Bailey’s Litigation and Disputes team is warning that enforcement action against debtors has become doubly difficult due to the Covid-19 pandemic.

Rebecca Smith, Chartered Legal Executive, says obtaining a court judgment against a defendant is now just one stage in the long litigation process.

Blandford-based Rebecca added: “Legal proceedings can often be complex and stressful and obtaining a County Court Judgement (CCJ) for a claimant may seem to be a ‘light at the end of the tunnel’.

“However, obtaining the judgment does not immediately bring an end to the litigation process – the next hurdle the claimant must face is the actual enforcement of the judgment.

“Throughout the course of the Covid-19 pandemic, the matter of enforcing a judgment has posed a significant challenge to lawyers and creditors.

“While measures are in place to assist with enforcement and the country slowly begins to unlock, it may yet still be some time until Covid-19 ceases to hinder the enforcement process as a whole.”

Blanchards Bailey, continues to expand strategically to help meet demand following sustained business growth across the board over the last financial year

The firm also bucked the trend during the Covid-19 pandemic by continuing to invest heavily in staff and the latest technology and to offer a full service for individuals and businesses throughout Dorset.

Rebecca said that 2020, unsurprisingly, saw unprecedented levels of household and public debt owing to the sharp rise in unemployment, business closures and a looming recession.

Emergency government intervention sought to help alleviate the pressure imposed on debtors who may otherwise have lost their jobs, livelihoods, homes and income.

Rebecca, added: “However, it must be remembered that debtors are not the only victims of Covid’s impact.

“Allowing relief of debt sanctions, albeit temporarily, leaves individual and commercial creditors unable to recover monies owed and deprives them of urgently needed cashflow to keep themselves afloat.

“Clearly, there is a fine balance to be struck between debtors who need more time to pay due to unforeseen circumstances with the need for creditors to recover their own money in a timely and economically viable manner.”

Rebecca said although unpaid debts for a fixed amount could still be processed via the County Court Money Claims Centre (CCMCC), the system had become saturated with claims due to widespread court closures.

As such, while a claim could still be processed online, the timescale for recovery of the debt was dangerously uncertain for a creditor.

At the peak of the pandemic, immediate enforcement options such as bailiff action and the seizure of goods were restrained in an attempt to curb the spread of Coronavirus adding yet another obstacle for the creditor to overcome.

However, Rebecca, said there were still a number of options open to recover a debt in the midst of a pandemic – Charging Order, Statutory Demand and Attachment of Earnings Order.

“There is no substitute for professional advice and we would always recommend coming to us in the first instance to discuss these three main options.”

A Charging Order secures the debt against the debtor’s property (if they have one) which would prevent any sale without first redeeming the charged debt. A further Order for Sale compels the debtor to sell the property and redeem the debt, although this is decided by the court on a reasonableness basis with no guarantees it will be granted.

Rebecca said: “Securing the debt against a property therefore gives the creditor peace of mind that the debt will eventually be paid, although a Charging Order still does not solve the pressing cash flow issue.”

Alternatively, obtaining a CCJ can be used as evidence that the debt in question is not disputed. Therefore, a creditor may pursue the debt by way of a Statutory Demand for which there is no requirement for a hearing although the debtor would be required to settle the debt within 21 days or face further court proceedings.

Rebecca said: “The legal seriousness of a statutory demand may be enough to illicit payment from a debtor who has defaulted on a court judgment or at least allow for payment plan negotiations to begin. However, this option is only available to creditors who have a debt of at least £5,000 for individuals and £750 for businesses.”

Finally, an Attachment of Earnings Order means the debt is recovered by having the debtor’s employer pay a portion of the debtor’s wages to the creditor until the debt is settled.

Rebecca said: “Whilst this would not have been a viable option at the peak of pandemic when the security of many jobs remained uncertain, creditors may wish to explore this option now that restrictions are easing and employment is generally more stable than it was one year ago.”

For further advice on debt enforcement please contact our Litigation and Disputes team on 01258 459361.