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Client Q&As

Print publication

07/05/2015

Client Question 1

I have obtained a money judgment against a defaulting borrower, but what happens next?

Walker Morris Answer
It’s all very well having obtained a court judgment against debtor, but how does that convert to payment of cold, hard cash? The truth is that, although you have overcome the most significant hurdle, there are still some practical steps to take and options to consider.

  • Firstly, the debtor must be given the opportunity to pay, either within the time period specified by the order or, if a date is not specified, within 14 days from the date of the order. (If the debtor did not attend court, you should allow 14 days from the date of service.)
  • Check whether the debtor has appealed the judgement and/or sought a stay of execution. If so, you may still be able to enforce your court order. The court will only grant permission for a stay of execution if a debtor’s appeal has a real prospect of success, so do not assume that any application will prevent or significantly delay payment.
  • Often, particularly when competing debt cases remain ongoing, clients may take their eye off the ball following a successful hearing. However it is important to watch the clock. In simple terms, you cannot generally enforce the money judgement if more than 6 years have passed since it became enforceable. Apart from the fact that a money judgment may be rendered worthless if it is not effectively ‘redeemed’ in time, you should be wary of any delay at all because debtor’s assets may no longer be available as time passes, and a judge may be less inclined to exercise discretion when granting orders such as charging orders if there has been unnecessary delay.
  • Consider the debtor’s assets and other liabilities before enforcing. If this has not already been done (and recently re-checked) prior to receipt of the court order, it is a good idea to find out what assets and liabilities the debtor has before deciding which method of enforcement, if any, you want to take. For example, you might undertake a search of the debtor’s property address to see whether the debtor owns it him/herself and you should check the Insolvency Register to see if the debtor is bankrupt or subject to an Individual Voluntary Agreement (IVA). If the debtor is bankrupt or subject to other insolvency proceedings there are statutory restrictions in place which may prevent you from taking enforcement action. If you are concerned that assets or funds may be dissipated before you can enforce you may want to consider applying for a freezing order. If it turns out that the debtor is impecunious, however, you may not wish to throw good money after bad.
  • If you do then proceed with enforcement of the money judgement there a number of different options available:
  1. taking control of the debtor’s goods using Warrants and Writs of Control;
  2. securing a Charging Order over the debtor’s land, securities or certain assets;
  3. applying for a Third Party Debt Order;
  4. applying for an Attachment of Earnings Order; or
  5. pursuing Insolvency options. You may commence Bankruptcy Proceedings against an individual debtor if the debt owed is more than £750 (note this is due to increase to £5,000 from 1 October 2015) or if your debtor is a company you may want to commence Winding Up Proceedings.

Client Question 2
I would like to enforce a money judgment against a defaulting borrower by taking control of goods. What is involved? Are there any issues or practical points of which I should be aware?

Walker Morris Answer
Enforcing a money judgment through taking control of the borrower’s goods allows you to seize and sell goods in order to raise funds to satisfy a debt.

In order to take control of goods you need to apply to the court for:

  • a Warrant of Control in the County Court if the debt is up to £5,000.00 in value; or
    a Writ of Control in the High Court if the debt exceeds £5,000.00.
  • (If the debt exceeds £600.00 you can make an application to transfer the proceedings to the High Court for enforcement via the High Court Enforcement Officers in any event. This can result in more effective enforcement.)

Once the Warrant or Writ of Control have been issued, notice of the imminent enforcement action is sent to the defaulting borrower. 7 clear days, not including Sundays or Bank Holidays and not including the day of service itself, must pass before enforcement can take place. The bailiff or enforcement officer can then attend the borrower’s property on any day between the hours of 6 am and 9 pm, to secure goods or enter into a controlled goods agreement. (Certain goods, such as basic domestic items or items needed for the borrower’s trade or employment (up to an aggregate value of £1,350) can not be seized.) A further notice is then provided to the borrower, along with an inventory of the goods and the goods are sold, usually at auction, and the proceeds are paid to satisfy the debt.

Enforcing a money judgment in this way can be a fairly quick and straightforward. It is also relatively cheap, as the cost of the court fee and the bailiff or enforcement officer are deductible from the proceeds of the sale, so provided goods of this value of recovered you don’t lose anything. However, it can sometimes be difficult to ascertain the value of the borrower’s assets prior to taking action. There is also a possibility of third party claims arising if property is taken which does not belong to the borrower. Finally, you should consider the risk of bad publicity and potential PR issues which may be associated with enforcing in this way.

Watch out for information on other enforcement options in our Q&As to come.