When it comes to debt management there are various options available to both the ‘creditor’ (the person to whom the money is owed) and the ‘debtor’ (the person who owes the money).
In the vast majority of cases, debts (howsoever caused) can be dealt with on an amicable basis and without the need for any legal intervention, such as County Court proceedings. This, of course, is welcome news for all concerned since anything above and beyond a ‘gentleman’s agreement’ to repay a debt can prove costly, time-consuming and extremely stressful.
What’s the normal procedure for debt recovery?
If a creditor is unable to recover the outstanding amount through a mutual arrangement then he or she can apply to their local County Court (or via the Court’s online money claim service) for a County Court Judgment. Once a formal letter before action has been sent (in accordance with the Civil Procedure Rules 1998), the creditor can then complete an N1 Claim Form which asks for full details of the debt (known as the ‘Particulars of Claim’) and any additional costs which then become payable, such as the Court issue fee, any legal fees and associated interest.
The Court issue fee is based on the amount claimed [1], legal costs will naturally vary between different law firms and interest can be claimed from the date upon which the invoice or debt first became due. If the debtor is an individual, then interest is claimed under s.69 of the County Court Act 1984. However, if the debtor is a business then both interest and compensation can be claimed under the Late Payment of Commercial Debt (Interest) Act 1998 at a slightly higher rate. There may also, of course, be additional fees due under any separate commercial contract between the parties, such as a standard cost for reminder letters and so on.
Once the N1 Form is received by the Court, it is sealed and submitted to the debtor (who then becomes known as the ‘Defendant’). The creditor from this point will be referred to as the ‘Claimant’. The Court permits a set period of time for the Defendant to respond to the potential claim being made against them and they can then either make payment in full, admit some of the debt or defend the entire amount claimed. If either of the latter two apply then the case will ordinarily be listed for hearing and each party can submit their own evidence in support of their claim.
In the event that the Defendant doesn’t dispute the outstanding amount then the Court will make a County Court Judgment (“CCJ”) for the total amount claimed and this will either be payable by instalments or ‘forthwith’ – in which case, the Claimant can instruct either the County Court or High Court bailiff to enforce it; depending on the amount owed.
What are my options as a debtor; or Defendant?
There are a number of ways for managing any debts you might have, namely:
- By entering into an arrangement with the creditor (or Claimant). This can either be done on a ‘private’ basis or via a debt management company (who will usually deduct a set amount of the debt by way of commission). This is usually, by far, the best option to take since it means you won’t have a formal CCJ registered against you.
- By applying for an Administration Order (where you have a Judgment for debts under £5k). These are managed via monthly payments to your local County Court which are then distributed on to your creditors.
- By applying for a Debt Relief Order or Bankruptcy Order – if you’re simply unable to repay your debts due to lack of sufficient assets or –
- By applying for an Individual Voluntary Arrangement; whereby you agree to make regular payments via a licensed insolvency practitioner who will divide your repayments between your existing creditors. Details of your IVA will be entered onto the Individual Insolvency Register and will remain there until 3 months have lapsed after the arrangement ends.
About the Insolvency Register
All members of the public have free access to the Insolvency Register, which can be found by clicking on the following link: https://www.gov.uk/search-bankruptcy-insolvency-register
The Register provides full details of all bankruptcies, debt relief orders and individual voluntary arrangements which are entered to. You don’t have to register to view the entries and can search it using either an individual or trading name (for sole traders).
In addition to this information, the Register also contains certain other details such as a list of those who have broken the terms of their arrangement or have been issued with a penalty such as a Bankruptcy Restrictions Order (“BRO”), Undertaking (“BRU”), Debt Relief Restrictions Order (“DRRO”) or an Undertaking (“DRRU”).
The Insolvency Register is maintained by The Insolvency Service, who are responsible for keeping all entries up-to-date, ensuring that any valid corrections are facilitated and making them available for public inspection.
What happens with company insolvencies?
As the Insolvency Register contains information about individuals and sole traders only, it doesn’t provide details of any company insolvencies. These are managed separately via Companies House and you can search for information by using this link: www.companieshouse.gov.uk
In some debt cases (and depending on the severity of the debt) company directors can also be disqualified. Details of these appear on the website https://www.gov.uk/government/organisations/companies-house
Does the insolvency register cover Scotland and Northern Ireland?
No; separate registers exist for Scotland and Northern Ireland so it’s important to note that insolvencies in these areas won’t appear on the Register.
For details of bankruptcies in Scotland you can email aib@aib.gsi.gov.uk or refer to the website, www.aib.gov.uk/about/contact/enquiryform.
For details of bankruptcies in Northern Ireland you should email insolvency@dttini.gov.uk
You should be aware that charges may apply for any searches conducted across either Scotland or Northern Ireland – however, searches with the UK are completely free of charge.
How long will my details appear on the Insolvency Register?
Up until 1st April 2004 an individual’s details were only retained on the register for a period of two years after the date of discharge. However, since that time – and in order to reflect one of the key aims of the Enterprise Act (i.e. to reduce the stigma of bankruptcy), details are now only retained for a period of three months once the arrangement has ended. That said, credit reference agencies may retain this type of information for longer and in some cases, up to a period of seven years.
References
[1] https://www.gov.uk/make-court-claim-for-money/court-fees
I have worked for FTSE 250 Insurance Companies in Client Services, Debt Management and Administration Roles.
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