County Court Judgments, commonly referred to as ‘CCJs’, can help your business recover money that’s owed to you. Obtaining a CCJ is the first step in a long process. Because there are many different ways a CCJ can be enforced, it’s important to weigh up the pros and cons of each of the potential avenues so that you can maximise your chances of successfully securing funds when a customer doesn’t pay you on time.
In this guide, the business disputes solicitors at Harper James will cover what a CCJ is, the processes for enforcing a CCJ against a company, whether you need a lawyer to help you with enforcement, what the relevant time limits and restrictions are and other important considerations you need to be aware of.
What is a County Court Judgment (CCJ)?
A County Court Judgment (CCJ) is a formal order that the County Court can make if it’s satisfied that you’re owed money and that the individual or a company has failed to pay you that money on time.
What is the process for enforcing a County Court Judgment (CCJ) against a company?
There are several options available when it comes to enforcing a CCJ against a company and sometimes it’s possible to utilise more than one at the same time, depending on the circumstances. These options include using bailiffs or High Court Enforcement Officers, securing a Charging Order against a property, obtaining a Third-Party Debt Order or Attachment of Earnings Order, or even issuing a winding up petition.
It’s possible to apply to the court to question a Judgment Debtor as to the nature and extent of their assets to be better informed about which enforcement option to go for.
Below is a brief outline of the processes for these types of enforcement options, along with some of the advantages and disadvantages of each approach:
- Bailiffs and High Court Enforcement Officers
Instructing a bailiff or High Court Enforcement Officer is a very common way to enforce a CCJ. Different rules apply to each but broadly speaking, a bailiff can enforce a CCJ and a High Court Enforcement officer can enforce a High Court judgment: it’s possible to ‘transfer up’ the CCJ to the High Court for these purposes, as long as the judgment is for over £600, including the debt, interest and court fees, and it’s less than six years old.
Whether you instruct a bailiff or a High Court Enforcement officer, the outcome is intended to be the same, i.e. they take control of goods to the estimated value of the CCJ from the debtor and sell them at auction, putting the proceeds towards the payment of the outstanding debt.
Advantages: Compared to some other enforcement methods, using a bailiff or High Court Enforcement Officer can be a relatively quick and straightforward way to recover what you’re owed – sometimes even starting this process can be enough to prompt a debtor to pay you.
Disadvantages: Certain kinds of goods are protected by law or are owned by a third party and can’t be seized from the debtor, so the success of this method of enforcement ultimately depends on them having goods that meet the amount of the judgment debt and are capable of being seized.
- Charging Orders
A Charging Order is a secured charge on a debtor’s solely or jointly owned property (if jointly owned, the charge attaches itself to the debtor’s share). You need to apply to the County Court for an Interim Charging Order off the back of the CCJ, which can be temporarily registered against the property before the court lists a hearing for the Charging Order to be made final. If it’s made final, the charge ‘sits’ there until the property is sold, either voluntarily by the debtor or through forced means if you decide to apply for an Order for Sale, and the proceeds of the sale then satisfies the debt owed to you (to the extent there are available funds after any prior mortgages are paid off).
Advantages: Having a Charging Order secured on a property can be problematic for a debtor’s finances, for example, it can make remortgaging trickier, so the mere threat of a charge being applied for can sometimes result in payment.
Disadvantages: This method of enforcement is only effective if there’s enough equity in the property to cover what’s owed to you after any other charges that take priority over yours are paid off. It could be a long time before the debtor sells the property of their own volition – or obtaining an order to force a sale can be lengthy and complicated with no guarantee of success, particularly if the debtor’s family also reside at the property.
- Third-party Debt Orders
A Third-Party Debt Order diverts money that may otherwise be paid to the debtor and is usually made against a debtor’s bank or building society. It is a two-step process, with an interim order first being made which has the effect of freezing the funds once it’s in place, then at a final hearing a judge will decide whether the third-party ought to pay the sums owed to you from the funds that have been ringfenced by the order.
Advantages: The money the order attaches itself to is readily available to be paid to you if a final order is made without the need to seize and sell any goods or property first.
Disadvantages: Timing is crucial when applying for a Third-Party Debt Order. Because funds are frozen as soon as the third party is served with the order, there’s a risk that there’s insufficient money held by that third party on a given day to satisfy the debt – for example, a bank account might be overdrawn or the debtor might not be paid their wages until a later date, at which point it will be too late. This type of order can’t be applied for against a joint account unless both or all of the account holders owe you money. You also need to know where the debtor’s money is being kept as the application must be directed against a specific financial institution.
- Attachment of Earnings Order
An Attachment of Earnings Order allows you to have the portion of the debtor’s salary that’s owed to you paid directly to you from their employer via the court. After an application is made, the court will decide what’s affordable for the debtor based on their means, the court will decide if they should make the order and if so, in what amount and how long for.
Advantages: The payments are made automatically to you from the debtor’s wages and very often because a debtor won’t want their employer to become involved in their personal affairs, they’ll find another way to settle the debt.
Disadvantages: You can’t use this method of enforcement if the debtor is self-employed or if the debtor is another business. The court determines how much should be paid to you from the debtor’s wages on each of their paydays, taking into account their living expenses, it can take a long time for your debt to be satisfied.
- Winding Up Petition
If the debtor is a limited company and the debt totals £750 or more then you can issue a Winding Up Petition to have the company closed (compulsorily liquidated). One of the effects of this is that assuming there are sufficient funds available following the winding up of the business, you’ll receive payment of some or all of your debt.
Advantages: The threat of a company being wound up can be enough to encourage settlement of your debt.
Disadvantages: You remain as an unsecured creditor so the liquidation costs and any secured creditors take priority when it comes to distributing the debtor’s assets so there is a substantial risk that you will not be paid in full depending on the debtor’s financial state.
Do I need a lawyer to enforce a County Court Judgment?
While you don’t necessarily need a lawyer to enforce a CCJ, it’s wise to seek legal advice on the most appropriate method(s) of enforcement depending on your situation – particularly if the stakes are high financially or the matter is complex. A lawyer can handle all of the paperwork for you and represent you in court if needed.
What are the time limits and restrictions on enforcing a County Court Judgment?
The rules state that a CCJ must be enforced within six years of the date of it. There might be restrictions on enforcement imposed by the court that are based on the debtor’s circumstances, for example, if they become insolvent.
Can a debtor challenge the enforcement of a County Court Judgment?
Yes, and this can be for any number of reasons such as an argument being raised that there’s a technical problem with the CCJ, that they’ve already paid the debt or that they need more time to pay. This means that if the debtor applies to the court to have the CCJ set aside or asks it to vary the payment terms, it can make enforcement action more difficult.
What if the business claims they are insolvent?
This is another factor that can complicate enforcement attempts and even prevent you from recovering the debt in the worst-case scenario if the claim turns out to be genuine. It’s advisable to search the Bankruptcy Register and Companies House straight away to see what information is held in these places if a debtor claims their company is insolvent because this should shed some light on the truth of this claim and inform your next steps. You could also consult a credit ratings agency.
Summary
As this guide demonstrates, there are several ways in which a CCJ can be enforced once you’ve obtained it. There is no ‘one size fits all’ method, so it’s worth thinking carefully and strategically about which process will maximise your chances of effectively recovering what you’re owed, taking into account the debtor’s means and circumstances as far as possible based on the information that’s available to you. It is generally a good idea to move quickly once a CCJ has been obtained as the debtor’s financial state may deteriorate over time and undermine your chances of recovering the debt.
