Once judgment has been obtained then assuming that the judgment debt is not paid within the terms stipulated within the judgment, then a Claimant will need to consider how to compel payment. Enforcement of a judgment does not happen automatically.
A judgment debt must be paid within 28 days of the date of judgment unless the court has made a specific Order that it should be paid by instalments. If a party (in the vast majority of cases, the Defendant) has not paid within that time, then the receiving party has a number of options open to enforce the judgment.
The most common methods of enforcement are outlined below. Your solicitor will advise you as to which method or methods are likely to be the most appropriate for the particular circumstances of your case.
Most methods of enforcement are only available where there has been a failure to pay the judgment debt or a failure to pay any instalment due under it.
Parties
Once the judgment has been given, the parties to a claim are no longer called Claimant and Defendant. They are called Judgment Creditors and Judgment Debtors, (it does not follow that a Judgment Creditor is a former Claimant).
The methods of enforcement set out here are a selection of those most widely used, but there are others. These methods of enforcement apply equally to Judgments and certain categories of Court Orders that are capable of being enforced by the methods set out below.
Limitation
An action cannot be brought on any judgment after the expiry of 6 years from the date it became enforceable. The term action only applies to the commencement of fresh proceedings on a judgment, it does not include enforcement proceedings so, strictly speaking, for enforcement purposes and enforcement proceedings, no limitation period applies. However, any delay in enforcement on the part of the judgment creditor will affect any award of interest as recoverable interest is limited to 6 years on a judgment that is executed after the expiry of the 6 year period.
Court permission is required to enforce a judgment debt that is more than 6 years old. In a particular case of Warrants of Execution, these must be renewed after 12 months if they have not been enforced. Further, the court is entitled to take account of delay and enforcement when exercising its discretion to grant any Order sought.
Simultaneous Enforcement
There are a number of methods of enforcement available to the Judgment Creditor and, provided there is no obvious conflict between the methods used, the Judgment Creditor need not try enforcement by one method before considering another; rather, he can use a number of methods of enforcement at the same time although obviously he can only be paid once on the judgment debt.
Further, the court will only keep a record of the judgment debt for a secured sum the date it is given. There may be practical difficulties in enforcing a judgment close to this date because the record of judgment will in most cases no longer exist.
Order to Obtain Information
Not strictly a method of enforcement, this Order allows the Judgment Creditor to consider the method of enforcement that is most likely to result in payment.
This type of Order requires a Judgment Debtor to attend court to provide information about their means and any other matter that might be relevant to enable the Judgment Creditor to enforce judgment.
These types of applications are usually dealt with by a court officer who will issue the Judgment Debtor with an Order to attend court by appointment for the purpose of producing any documents the court may request and to answer on oath any questions the court may require to be answered.
It is contempt of court for a Judgment Debtor not to obey the Order to attend. This type of Order is normally made on an application without notice to the Judgment Debtor. This means that the Judgment Debtor will not know about it until the notice is served. It will normally require the Judgment Debtor to attend the court in which the judgment was made unless, for some reason, it has been transferred to a different court, in which case it will be issued from that court.
Strictly speaking, an Order to Obtain Information is not a method of enforcement; it is an Order that enable a Judgment Creditor to enforce the judgment. In some cases, when the court gives a judgment, it may make specific provision that the judgment is not to be enforced without leave of the court. However, as this type of Order is not a method of enforcement, there is nothing to stop a Judgment Creditor making an application to court for an Order to Obtain Information, the Judgment Creditor will just be limited as to what he can do with that information in the absence of leave to enforce.
Personal Service of Order and Proof of Service
The Order to attend must be served personally on the Judgment Debtor. In the County Court, the Bailiff Service can only be used to serve an individual who is a litigant in person; that is, somebody who is acting on their own behalf.
In all other cases, the Judgment Creditor must make their own arrangements to personally serve the Judgment Debtor. This will usually be done via a Process Server who will then file an Affidavit proving that the Order was served. This is important because the Order that is issued by a court will contain a Penal Notice that will empower the court to commit a Judgment Debtor to prison for contempt in the event that the Order is not complied with. It is therefore important to ensure that the Order is actually served on the Judgment Debtor, and that adequate proof of service is obtained.
The Purpose of an Order
The purpose of an Order to Obtain Information is to elicit sufficient information from the Judgment Debtor about their finances and personal circumstances to enable the Judgment Creditor to make an informed decision about the best way to enforce the judgment or, indeed, make a decision about whether enforcement is likely to be worthwhile.
The questioning is carried out either by a court officer or a judge.
If the questioning is carried out by a court officer then the Judgment Creditor or his representative may attend.
If the questioning is carried out by a judge, the Judgment Creditor or his representative must attend and conduct the questioning.
There are provisions for committal to prison of the Judgment Debtor for failure to attend but it should be noted that these provisions are rarely enforced and it is more usual for a judge or court officer to adjourn the matter to a later date and sometimes this may happen more than once as committal to prison is generally treated as a penalty of last resort.
Once the Judgment Debtors financial situation is known, the Judgment Creditor will be able to make an informed decision as to which method of enforcement to use. In some circumstances, however, the Judgment Debtors financial situation may be so precarious that the Judgment Creditor may make a decision not to enforce the judgment at all or make a decision not to enforce immediately, in which case, the time limits set out above at 14.2 will be relevant.
Warrants of Execution
A Warrant of Execution authorises court bailiffs to attend at the Judgment Debtors home or business to either collect money (or monies) owed under the judgment debt or to remove goods from the Defendants home or business to sell at auction.
There are limits to the types of goods that court bailiffs are empowered to remove and they cannot remove goods that are necessary to allow a Judgment Debtor a basic standard of living or the tools of his trade.
A Warrant of Execution cannot issue for any amount in excess of £5,000.00 unless it is to enforce an agreement made under the Consumer Credit Act 1974.
Where a debt is in excess of £5,000 the matter must be transferred to the Sheriffs Officer or the High Court where the terminology changes slightly and it becomes a Writ of Execution or a Writ of fi.fa.
Court bailiffs (enforcement officers) operate under very strict rules as to what they may and may not do in order to levy execution.
The rules are potentially complicated and your solicitor will discuss the details of any warrant or writ with you as necessary.
Third Party Debt Order
A Third Party Debt Order directs a third party, usually a bank or building society, to pay money out of the Judgment Creditors bank or building society account to satisfy the debt. A Third Party Debt Order may also be served on anyone who owes the Judgment Debtor money so, for example, if a Judgment Debtor says they cannot pay you because they are owed money by someone else, then a Third Party Debt Order can attach to that third party so that they pay money to you rather than paying the Judgment Debtor.
However, in order to obtain a Third Party Debt Order, the Judgment Creditor does need to have evidence as to the Judgment Debtors bank or building society accounts and/or as to any other debts. These Orders lend themselves best to situations where that information is already available in some form.
If a Third Party Debt Order freezes a bank or building society account which is overdrawn at the time that the bank or building society receives the Order, then the Judgment Creditor cannot require payment from it. It is also quite possible and, occasionally likely, that a Judgment Debtor will stop paying money into an account to avoid paying the Judgment Creditor.
Attachment of Earnings
An Attachment of Earnings Order directs the Judgment Debtor's employer to deduct a specified sum from the Judgment Debtor's earnings and to pay that direct to the court. The court will then pay that over to the Judgment Creditor.
The procedure closely follows that which is used for an Order to Obtain Information.
The application for this type of Order must be made in the Judgment Debtors home court which is the court closest to where they live and, in consideration of an application for an Attachment of Earnings Order, the court will stipulate an earnings level below which no amount may be deducted and this is in order to allow a Judgment Debtor a minimum standard of living.
Failure to comply with the terms of an Order may be further enforced by a fine (maximum £250) and may be enforced by way of a Committal Order.
A Charging Order
A Charging Order attaches to property in the same way as a mortgage and prevents a Judgment Debtor from selling their property (in most cases, land) without paying the Judgment Creditor what is owed to them. It follows that a Charging Order can only be made where the Judgment Debtor has an asset to which a charge may attach (commonly their home). Charging Orders are normally used as a lever to secure payment of a debt in instalments, the lever being that if the payments are not maintained then the Judgment Creditor may be able to obtain a further Order for Sale in order to release sufficient money to pay the debt.
However, courts are generally reluctant to allow such an Order where the level of the debt is low or low in comparison with the value of the asset.
The courts are also reluctant to make an Order for Sale in the case of a first default and there normally has to be a history of serious or persistent default before a court will be persuaded to make an Order for Sale. Furthermore, courts are reluctant to enforce a Charging Order against a Judgment Debtor's home where it is being used to house anyone who is vulnerable, such as children or the elderly.
All of this means that the process for obtaining a Charging Order may be slow and the process of enforcing the judgment debt due and secured under the terms a Charging Order is often extremely slow and, while it secures the debt, this does not mean that it is any easier to enforce it.
The effect of the Judgement Debtors Insolvency on Enforcement
If a Judgment Debtor becomes insolvent whilst the Judgment Creditor is in the process of enforcement proceedings, then the enforcement proceedings will not be allowed to continue. The judgment debt will, however, be taken into account with any other debts due to other creditors. The insolvency process means that some debtors take priority over others and a Judgement Creditor does not have any right to preferential treatment. In those circumstances, it is frequently the case that the Judgment Creditor will get nothing because there is simply not enough money available to the insolvency administrator.
If a Bankruptcy Order is made against a Judgment Debtor once execution proceedings have begun but not been completed, then a judgment creditor is, in most cases, unable to retain the benefit of any enforcement order that is obtained.
There are similar provisions in place in relation to company debtors but they are not explored here.
Insolvency Proceedings Individual Bankruptcy
Provided the Judgment Debtor owes more than £750, a Judgment Creditor can apply for an individual to be made bankrupt or for a company to be wound up. Before doing, the Judgment Creditor must serve a Statutory Demand on the Judgment Debtor.
The following summary assumes that the Judgment Debtor is an individual. The provisions for companies are not outlined here.
The Statutory Demand
A Statutory Demand is a demand for the repayment of money that is set out in a particular form and which requires the payment of the debt within 21 days, after which, if the debt is not paid or arrangements for payment have not been agreed with the Judgment Creditor, the Judgment Creditor can petition the court for either the Judgment Debtor, Bankruptcy or a Winding-up Order.
Whilst there is no legal requirement for a Statutory Demand to be served personally on the Judgment Debtor, in practice it makes sense to do so and to obtain an Affidavit of Service as proof that the Statutory Demand was properly served. A process server is normally instructed to effect service.
A Judgment Creditor may present a Bankruptcy Petition if he is owed or can show he will be owed in the future, more than £750 in circumstances where the Judgment debtor is either unable to pay the debt now or has no reasonable prospect of being able to pay it in the foreseeable future. The failure to comply with a Statutory Demand is treated as proof that these conditions are fulfilled.
Note that a Judgment is not a prerequisite to the service of a Statutory Demand, which can be served in respect of a specific sum that is payable immediately.
Creditors Petition a Pyrrhic Victory?
The decision by a Judgment Creditor to present a Bankruptcy Petition against a Judgment Debtor is a step that requires careful consideration. The fees for the presentation of the Petition are paid by the Petitioner who has no automatic entitlement to recover that money let alone any money due under the Judgment Debt to which the Petition relates.
There are occasions when the Judgment Debtor may try and avoid service and in those cases the Judgment Creditor may ask the court to approve an alternative method of service.
Before issue, the court will affix a return date on which the Petition will be heard. This is part of the Petition. Once a Petition has been issued, it must be served personally on the Judgment Debtor. This is normally done via a process server who will swear an Affidavit of Service.
The Judgment Debtor is entitled to oppose the Petition and in addition, any other creditor of the Judgment Debtor must be given notice of the Petition and is entitled to attend the hearing and make representations to the court.
The court cannot make the Judgment Debtor bankrupt if it is satisfied either that the debtor is able to pay all his debts, (taking account of all of his assets and liabilities), or that the petitioning Judgment Creditor has unreasonably refused an offer from the Judgment Debtor to secure or compound for the debt detailed on the Petition.
If the Judgment Creditors Petition succeeds and the Judgment Debtor is made bankrupt, then responsibility for the administration of the bankrupted estate is passed to the Official Receiver who is a Court Official. There are a number of options available to the Official Receiver to administer the bankrupted estate but all that is important to a Judgment Creditor is to know whether he is likely to be paid. A Judgment Creditor, even one who has petitioned in bankruptcy, is in no better position to recover his money than any other unsecured creditor. Preferential debts are paid first but beyond that, all other unsecured creditors rank equally. There is no special treatment or priority for a petitioning creditor even one who has an enforceable Judgment.
The exception is secured creditors, that is, anyone with a charge over the bankrupts property will still take the benefit of their security provided there is sufficient equity in the secured property to satisfy the secured debt.
If the Judgment Creditor is to recover anything, it is normally determined by reference to pennies in the pound. So, for example, if the Judgment Debt is £1,000 and the Judgment Debtor only has £100, each Judgment Creditor will receive a penny for each pound they are owed. Clearly, this is not very satisfactory and often a Judgment Creditor will only have the pyrrhic victory of obtaining the Bankruptcy Order, they will receive little or no money from it but will have paid out a large amount of money in order to obtain the Bankruptcy Order.
Of course, a Statutory Demand can be issued as a lever even where the Judgment Creditor has no intention of following that up with a Petition in Bankruptcy. Depending on the circumstances of the Judgment Creditor, the service of a Statutory Demand may be enough to encourage payment of the Judgment Debt.
Further, there are provisions for a Judgment Debtor (indeed any debtor) to enter into an individual voluntary arrangement (an IVA) but these are beyond the scope of this summary.
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