Alan J. Smith, Chair of the High Court Enforcement Officers Association, looks at the different enforcement solutions that can lead to positive outcomes for creditors.
As we enter a period of uncertainty and inflation, coming off the back of a global pandemic, it is likely that credit management will become even more vital to prevent losses caused by potential increased debtor instability.
Speed of action is a key factor in gaining a positive outcome.
There isn’t a one size fits all solution when it comes to enforcement, so choosing the most appropriate option for the debtor’s circumstances is vital. You should consider factors like their credit history and current financial and personal circumstances, as well as the needs of yourself or your business as the creditor.
A good first step is running a trace on the debtor through a credit reporting agency. It can help you to gauge how likely a positive outcome will be before you spend additional time and money pursuing a judgment.
If you decide to proceed, there are several enforcement options. It’s complicated, or at least it appears that way. Let’s take a look at what these different options mean:
With a charging order the debt will be secured against the debtor’s property. However, you may have to wait years for the property to be sold or re-mortgaged, as the circumstances would have to be exceptional for a sale to be enforced immediately. It’s worth remembering that if a charging order is granted you can still pursue other enforcement options at the same time to recoup some or all of the money owed to you.
Attachment of Earnings Order (AEO)
With an Attachment of Earnings Order (AEO), the court will set a weekly amount which will be paid to you directly from the debtor’s wages. The debtor must remain in their job for payments to continue, so you should consider whether they are in stable and regular employment before pursuing an AEO, as once it’s granted you may not use any other form of enforcement.
Winding up orders
A winding up order is a court order that forcibly closes or ‘winds up’ a limited company. It means the end of the company, the sale of any assets, and its eventual dissolution at Companies House. Winding up orders, or compulsory liquidation, and bankruptcy petitions are all about leverage. If the debtor takes no notice, you are unlikely to see much or any of your money.
Third-party debt order
A third-party debt order requests the debtor’s funds held by a third party are paid to the creditor directly. This could be from trade debts owed to a business, a lump sum like a redundancy settlement or inheritance, but more usually it is the bank or building society holding the money. If the funds are not available at the moment the request is made, you have to restart the process, which can make it time consuming, costly and not very effective.
Engaging an enforcement professional
Engaging a County Court bailiff or a High Court Enforcement Officer is the most commonly used form of enforcement, as they are trained professionals who can be flexible by organising payment plans or taking control of goods if a debtor is unable to make a payment in full. It’s worth remembering there are important differences between the two.
County Court bailiffs
County Court bailiffs are salaried civil servants operating under a Warrant of Control and can enforce judgments to a value of £5,000. However, there are significant delays in the County Court system due to years of under resourcing and backlogs. This means debtors can potentially move on and need to be traced again before a County Court bailiff can secure a positive outcome.
High Court Enforcement Officers (HCEOs)
While County Court bailiffs can only enforce judgments to a value of £5,000, non-regulated judgments above £600 can be transferred to the High Court. There is no upper limit.
Similar to County Court bailiffs, High Court Enforcement Officers (HCEOs) operate under a National Code of Conduct, complying with the Taking Control of Goods regulations. Their training and qualifications are at a high level, enabling them to navigate the more complex cases seen in the High Court.
Unlike County Court bailiffs, HCEOs run private businesses with a remunerative and reputational investment in securing a positive outcome for creditors. If they aren’t successful, then they don’t get paid.
Engaging with debtors at the earliest opportunity is crucial to ensure that enforcement is effective, and that any vulnerabilities are identified at the earliest opportunity. We believe that in many cases HCEOs offer the best chance of achieving positive outcomes through enforcement by helping creditors to navigate the often complex circumstances of the debtor and recover what is owed to them.