Obtaining a money judgment after court proceedings is no doubt rewarding, especially after what can be lengthy and costly proceedings. But often it is only one step in a process that is still ongoing. If the debtor pays following the judgment there is usually no issue, but what happens if the debtor does not make payment of a monetary judgment. At this point, it becomes necessary to explore the different options available to enforce the judgment and decide which is the right avenue for you and the circumstances involved.
We outline a brief summary of some of the common enforcement methods available for money judgments.
Taking control of goods using writs and warrants of control
This is a popular method since it can be achieved relatively quickly. It requires the issue of a court document which commands a High Court enforcement officer or other enforcement agent to take control of and sell the debtor’s goods, in order to raise funds to satisfy the judgment debt. Naturally, this method is dependent on the debtor having goods of sufficient value and further, certain goods are exempt. In addition, care has to be taken that the goods in question actually belong to the debtor and not a third party.
Third party debt order
This method provides for any sums owed which are in the hands of a third party such as a bank, to be frozen and seized for the benefit of the judgment creditor. It is dependent on there being a third-party debt owed to the judgment debtor but it can be useful if, for example, you are aware that the debtor has a bank account into which their salary is paid.
Charging order
This is a means of gaining security for a debt by imposing a charge over the debtor’s beneficial interest in land, securities or certain other assets. In the case of a charging order over a property belonging to the debtor, this would mean that the debtor would be prevented from selling it without paying what is owed to the creditor, provided there is enough equity after payment of any priority creditors. It should be noted that the court usually exercises discretion in granting a charging order based on the value of the judgment debt and on the basis that low-value judgments could instead be enforced via another more proportionate method.
Charging orders are generally most effective when there is significant equity in a property and the debtor is the sole owner. A charging order in itself will not raise the funds to satisfy the judgment debt but will secure the debt and enable the judgment creditor to apply for an order for sale to recover the debt from the sale proceeds.
Attachment of earnings
An attachment of earnings order requires that part of a debtor’s income is automatically deducted by their employer and paid directly to the creditor until the debt is paid. There are set rates which apply based on the debtor’s financial situation and resources available. This is a method which is only available in cases against individuals in the County Court, however if you have an order from the High Court, it is possible to have this transferred to the County Court. This is an avenue which is generally popular as it relatively inexpensive and it is advantageous to the judgment creditor as it does not require the debtor’s co-operation.
However, this method is only effective for as long as the debtor is in employment and it should be noted that high-value debts can take a long time to be cleared. In addition, if the debtor has other creditors and they have a relatively low total amount of debt, the court does have a duty to consider whether a County Court administration order should be used instead. On this basis, an application for an attachment of earnings might be refused.
If the court decides an administration order should be used instead, this normally means that the debtor would make one payment to the court either every week or every month. The money can be taken from their earnings but there is no interest payable. It is also important to be aware that whilst a debtor is paying under an administration order, a creditor is not permitted to take any further action without the permission of the court.
Insolvency proceedings – bankruptcy and company liquidation
If an individual owes you £5,000 or more, you can apply to make them bankrupt. In the case of a company, you can apply for it to be wound up if it owes you more than £750. In both cases, a statutory demand is often served prior to commencing proceedings.
If a bankruptcy or winding-up order is made, the debtor’s assets are collected by a trustee in bankruptcy or a liquidator and will be distributed amongst all the creditors in accordance with the insolvency rules. For example, secured creditors rank higher in priority than unsecured creditors.
The disadvantage of this option is it can be expensive and time-consuming and there is always the risk that it may not lead to any recovery of the debt. However, just the threat of insolvency might sometimes be sufficient to make a debtor pay, although this sort of tactic is not advisable since the courts discourage use of the insolvency procedure as a debt collection exercise, on the basis that it is a misuse of what it is intended to be for.
Paul Davis is the head of BHW’s Litigation department. If you would like any advice on enforcing money judgments, or assistance with any aspect of Litigation law, please contact Paul Davis on 0116 281 6231 or at Paul.Davis@bhwsolicitors.com.