Where there is a risk of the Limited Company being wound-up then the Judgment Creditor should monitor Companies House for a status change of the company from "Active". Enforcement action can be instructed for up to 6 years from the date a judgment became enforceable. You are able to continue trying to enforce for longer than the 6 years from date of judgment but you cannot start the first enforcement action past this date.
Court permission is required to enforce a judgment debt that is more than 6 years old. Warrants of Control from the County Court and Writs of Control from the High Court must be renewed after 12 months if they have not been enforced.
The insolvency process means that some debtors take priority over others and a judgment creditor does not have any right to preferential treatment. The judgment debt will be taken into account with any other debts due to other creditors. The judgment creditor may get nothing because there is not enough money available to the insolvency administrator. To do this the judgment creditor must serve a Statutory Demand on the judgment debtor.
The failure to comply with the Statutory Demand is treated as proof that these conditions are fulfilled. Presenting a Bankruptcy Petition against a judgment debtor requires careful consideration.
All fees for the presentation of the Petition are paid by the Petitioner who has no automatic entitlement to recover that money or any money due under the judgment debt. 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, for example Facebook account or email.
The court will affix a return date on which the Petition will be heard. There is no legal requirement for a Statutory Demand to be served personally on the judgment debtor but it is best to do so and to obtain an Affidavit of Service as proof that the Statutory Demand was properly served. A professional process server is usually instructed to perform service.
The judgment debtor is entitled to oppose the Petition and all other creditors of the judgment debtor must be given notice of the Petition and are entitled to attend the hearing and make representations to the court.
If the Petition succeeds and the Judgment Debtor is made bankrupt, then responsibility for the administration of the bankrupt's estate is passed to the Official Receiver. A judgment creditor who has petitioned in bankruptcy is in no better position to recover his money than any other unsecured creditor.
Preferential debts are paid first and all other unsecured creditors rank equally. The exception is secured creditors. Anyone with a charge over the bankrupt's property will still take the benefit of their security provided there is sufficient equity in the secured property to satisfy the secured debt, hence the value of securing a Charging Order. Recovery is normally determined by reference to pennies in the pound.
A judgment creditor may receive little or no money but will have paid out a large amount of money in order to obtain the Bankruptcy Order. However, 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 debtor, the service of a Statutory Demand may be enough to encourage payment. This 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. Alternatively, you may choose to rest on your security while the debtor makes repayments or until enforcement action becomes more viable.
Formerly known as a Garnishee Order, Third Party Debt Orders can come in useful where a debtor is being particularly evasive as they can be made without notifying the debtor, giving you the element of surprise. Furthermore, the Order compels a third party, such as a bank, to take the required action rather than the debtor themselves.
If the Protected Earnings Rate does not allow the employer to deduct the full Normal Deduction Rate, the unpaid payment cannot be carried over to the next payday. Similarly, if the employee stops working, the Order will lapse, although the creditor may apply for a new Order should the debtor find new work.
Where it becomes clear that the debtor does not have the financial means to repay the debt, the final resort for a creditor looking to minimise their losses is insolvency — bankruptcy where the debtor is an individual or winding up proceedings where the debtor is a company.
Typically, the first step to make someone insolvent is to issue a Statutory Demand. This has been especially important during the Covid pandemic as Statutory Demands for winding up businesses have been temporarily suspended until the end of September This often means that an unsecured creditor does not receive repayment in full but recovers more than if the debtor was left to struggle to repay their debts.
We provide a speedy, effective debt recovery service to cover all your needs. For more information, visit our Debt Recovery Services page or give us a call at your local branch in Alconbury , Peterborough , Spalding , Birmingham or Nottingham to speak with a member of our team.
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