Step 9: Enforcement of court orders
Bank and Credit Card
Primary Content Source: Dorrien Peters, Adam Bradshaw and Ben Hunt (DLA Piper)
If a court has decided that you must pay someone an amount of money (they have 'obtained judgment against you'), and they have not received a payment, they will want to 'enforce the judgment' to try and get their money. The court will not automatically enforce the judgment - they must ask it to.
There are a number of different methods of enforcement. They can ask the court for:
A warrant of execution;
An attachment of earnings order;
A third party debt order;
A charging order;
A bankruptcy or winding up order.
This guide will explain these methods in more detail. In order to choose the most appropriate method, they will should consider whether:
They are likely to get their money and court fee from the you;
You owe other people money or there are other court judgments;
You own any goods or assets which can be taken and sold at auction;
You are employed;
You have other earnings, such as income from investments;
You have a bank, building society or other account;
You own a property; or
Anyone else owes you money.
Instructing an enquiry agent to investigate you;
Searching the Register of Judgments, Orders and Fines to see if you have any outstanding or previous judgments or fines;
Obtaining a Land Registry search;
Applying to the court for an order to obtain information from you about your financial position.
Warrant of execution
A warrant of execution gives court bailiffs the authority to take goods from your your home or business. Bailiffs will try to either collect the money you owe or take goods to sell at auction.
A warrant of execution will only help if you have all the money being claimed for on the warrant or enough goods at the address which could be sold to raise the money.
The bailiff will not take your goods if they are not worth enough to pay the warrant after the costs of taking and selling the goods.
Bailiffs cannot always remove your goods. For example, they cannot remove essential household items, tradesman's tools or goods subject to hire purchase or rental agreements.
It is the most popular method of enforcement. This is because it is often the quickest method and the procedure is relatively simple and straightforward. It is an administrative procedure and is the only method of enforcement that does not require a decision from the court.
A warrant of execution form is sent to court and the bailiff will then inform you that a warrant has been issued and execution will follow.
If you do not then pay, the bailiff will then attempt to collect the money or goods from the property.
They cannot ask the county court to issue a warrant if the amount they want the bailiff to collect is more than £5,000 (unless you are enforcing an agreement made under the Consumer Credit Act 1974).
However, a similar procedure can be followed in the High Court and an Enforcement Officer can be asked to collect the money or remove goods.
How can you oppose this method of enforcement?
You can ask the court to suspend the warrant. For example, the court may agree to suspend the warrant if you agree to pay a certain amount each month.
If you fail to comply with the terms of the suspension, the court will lift it and the bailiff will attend the property to collect the money or remove goods.
You could attempt to obstruct the bailiff by claiming that your goods fall into the exempt categories of property that cannot be seized.
Court Form to issue in the County Court N323: http://hmctsformfinder.justice.gov.uk/courtfinder/forms/n323-eng.pdf (Court fee: £100 as at 1 November 2013)
Court Form to issue in the High Court - N293A: http://hmctsformfinder.justice.gov.uk/courtfinder/forms/n293a-eng.pdf (Court Fee: £60 as at 1 November 2013)
Attachment of earnings
An attachment of earnings order is sent to your employer. It tells the employer to take an amount from your earnings each pay day and send it to the collection office.
The money is then sent to the person you owe it to. This continues until the whole debt is paid. The automatic deduction from your wages means that they do not have to rely on you making payment.
You must be employed by someone before an attachment of earnings order can be issued. An order cannot be made if you are unemployed or self-employed. They can find out if you are employed by applying to the court for an order to obtain information from you.
To ask for an attachment of earnings order, they will need to complete a 'request for an attachment of earnings order' form and send it to court. The court will then tell you to pay all the money owed or fill in a form giving information about your employment, income and outgoings. This is called a 'statement of means'.
The court will then use the statement of means to decide how much you can afford to pay.
The officer will take into account how much you need to live on for food, rent or mortgage and essentials and to pay regular bills, such as electricity. This is called the ‘protected earnings rate’.
If you earn more than the protected earnings rate, an order will be made.
This means that if you are on a low wage, it may not be possible to make an attachment of earnings order.
If the court sets a low monthly deduction, it can take a long time to pay off a large debt.
In addition, no interest is payable on the debt while the order is in force.
If an attachment of earnings order is granted, they cannot use any other method of enforcement in conjunction without the court's permission.
How can you oppose this method of enforcement?
You can oppose the attachment of earnings order on the grounds that, if it were made, you would not be able to afford to pay your essential outgoings. For example, you may make the argument that an order would unfairly impact upon your family or other dependents.
You can ask for the court not to make an attachment of earnings order and, instead, propose a repayment plan. This is called asking for a suspended attachment of earnings order. If the court accepts your reasons for suspending the attachment of earnings order, the court won't start taking money directly out of your wages unless you do not keep up the repayments agreed to.
If your circumstances change, for example, if your income goes down or you suddenly have to regularly spend more money on essential outgoings, you can apply to the court to have the attachment of earnings order changed.
Third party debt order
By third party debt orders, sums owed to you that are in the hands of a third party, such as a bank, are frozen and seized for their benefit. The court will then direct the independent third party to pay the outstanding sum directly to them.
A third party debt order is most frequently used to stop you taking money out of your bank or building society account. The bank or building society then pays the money they are owed to them.
A third party debt order can also be sent to anyone who owes you money, such as a trade customer or your tenant..
Obtaining a third party debt order is a two stage process. Firstly, an application is made for an interim third party debt order.
If the judge is satisfied with the information provided, the judge will make an interim third party debt order which is sent to the third party.
A copy is not sent to you until seven days after it has been sent to the third party.
This is to ensure that the third party 'freezes' the money before you become aware of the order and is able to do anything to avoid it, such as removing money from the bank account.
The interim order will include a hearing date at which the judge will decide whether or not to grant a final third party debt order directing that the money that has been frozen be paid over to them.
You can oppose the application at the hearing.
It can be difficult to obtain a third party debt order as it is necessary to provide evidence that you are owed money by a third party or have a bank account.
The money held by the third party must also be held solely for you. This means that you cannot apply for a third party debt order against a joint bank account unless the debt is owed by all the account holders.
The debt must also be owed within the UK.
Third party debt orders can be used alongside other methods of enforcement.
How can you oppose this method of enforcement?
You can claim that you are insolvent. The court is unlikely to make a third party debt order if you are insolvent because this would mean that they are given preference over your other creditors. You can may oppose the order on the grounds that the money is in a joint bank account and the other account holder does not owe the debt.
You can claim that the making of the order will cause You can claim that the third party would be unfairly prejudiced by the making of a third party debt order. For example, if requiring the third party to make the payment would result in the insolvency of that third party, the court is unlikely to make the order.
A charging order is an order of the court placing a 'charge' on your property, such as a house or a piece of land. The charge will be the amount they are owed. The charging order will not normally get them their money immediately but it may safeguard their money for the future.
A charge on the property means that if the property is sold, the charge usually has to be paid first before any of the proceeds of the sale can be given to you.
You should note, however, that a charging order does not compel you to sell the property. In some circumstances, they may be able to ask for court for an 'order for sale' forcing you to sell the property.
Alternatively, they will have to wait for the owners to sell the property in due course or for another of your creditors to apply for an order for sale.
If there are already other charges on the property when their charge is registered (for example, a mortgage), then those charges will be paid first before theirs.
After a sale, there may not be sufficient funds to satisfy the judgment debt in full, or at all, if there are several prior charges.
Charging orders are a most effective method of enforcement when there is substantial equity in a property and you are the sole owner.
The method is less satisfactory if there is limited equity in a property or it is jointly owned or used as a family home. This is because an application for a charging order calls for the court to exercise discretion and it will be looking to see that enforcement by this method is proportionate.
Therefore, the court may not choose to secure a small judgment (for instance, £100), when this could be enforced by another method.
They can get evidence about your property and ownership by obtaining information on land or property held at HM Land Registry.
Similar to a third debt order, obtaining a charging order is a two stage process.
Firstly, an application is made for an interim charging order. If the judge is satisfied with the information provided, the judge will make an interim charging order. They should then register that interim charging order against your property at the Land Registry. The interim order will include a hearing date at which the judge will decide whether or not to grant a final third party debt order directing that the money that has been frozen be paid over to them.
You can oppose the application at the hearing. If a final charging order is granted, this too will be registered against your property at Land Registry.
How can you oppose this method of enforcement?
You may claim that there is very little or no equity in the property which means that they will not get their money back if it was sold and therefore a charging order would be ineffective. This may be because the value of the property is low or there are other charges, such as mortgages or other secured loans, already over the property.
You may have more than one creditor who may have agreed to allow you to pay your debts by instalments rather than asking for a charging order. You may argue that the court should not grant a charging order if none of your other creditors think it's necessary, especially if the others are owed more money.
You may argue that there other people living in the property such as children, older people or someone with a disability, who would be severely disrupted if the home had to be sold .
You may argue that there are other more suitable ways to pay back the debt than through a charging order. You may prefer to pay the debt back by way of an attachment of earnings order.
Making an individual bankrupt or putting a company into liquidation is one way to recover money owed.
The court can make a bankruptcy order against an individual who fails to pay their debts. A bankruptcy order makes sure that the assets of the bankrupt are shared out fairly among the creditors and imposes certain restrictions on the bankrupt.
The court can grant a winding-up petition and order compulsory liquidation of a company that fails to pay its debts.
Liquidation is a process in which a liquidator is appointed to 'wind up' the affairs of a limited company.
At the end of the process, the company ceases to exist. Its assets are sold and any money owed to the company is collected in.
The funds are then distributed amongst its creditors.
However, these methods should be approached with caution.
If such an order is granted, they will simply your other unsecured creditors.
There is no guarantee that you will have enough assets to satisfy all of the creditors' debts and they may only end up with a fraction of the money owed to them. Furthermore, pursuing insolvency proceedings is complex and very expensive. Instead, insolvency proceedings should be used as a last resort.
The threat of insolvency proceedings can be used as a means of compelling you to pay the money owed.
The principal argument that someone who wishes to oppose a bankruptcy or winding up petition will use is that it is a disproportionate step and that there are more appropriate means of paying back the debt.
The court will be keen to avoid taking the drastic step of ordering bankruptcy or liquidation if there is a possibility that a debt can be repaid by other means. References:
- Insolvency Service Guide - How to make someone bankrupt: http://www.bis.gov.uk/assets/insolvency/docs/publication-word/how-to-make-someone-bankrupt.doc
- Insolvency Service Guide - How to wind up a company that owes you money: http://www.bis.gov.uk/assets/insolvency/docs/publication-word/how-to-wind-up-a-company-that-owes-you-money.doc