Enforcement - what are the rules in the current climate?
- AuthorJosh Millichamp
With the introduction of the Coronavirus Act 2020 and Corporate Governance and Insolvency Act 2020 we look at some of the changes in standard litigation procedure in England & Wales.
- The extension of notice periods under the Housing Act 1988;
- A moratorium in place to prevent the winding up of businesses for Covid-related debts;
- A stay on enforcement on possession cases unless any exceptions apply;
- Debt Respite Scheme (Breathing Space) due to come into force on 4 May 2021 which will give someone in problem debt the right to legal protections from their creditors. There are two types of breathing space: a standard breathing space and a mental health crisis breathing space.
With this in mind many litigants are wanting to know whether it is worth litigating now in light of the restrictions on enforcement.
At present, businesses are protected from being wound up if the debt is Covid-related. So what other enforcement options are out there for litigants who hold an unsatisfied judgment?
Whilst there is a moratorium in place to prevent the insolvency and winding up of a business, the moratorium does not apply to individuals. Therefore a Claimant who holds a judgment against an individual Defendant can present a bankruptcy petition against them in order to execute the judgment. In order to be successful in Bankruptcy proceedings, the Petitioner (the claimant / creditor) will need to prove the debtor’s inability to pay the debt. This is done by way of serving a statutory demand which this is a formal written demand for payment of a debt served on the individual. A statutory demand is often the first step taken before bankruptcy proceedings are commenced against a debtor individual. This is because a creditor can present a bankruptcy petition in respect of a debt if it can show that the debtor is “unable to pay the debt owed” or it has “no reasonable prospect of being able to pay” and the debt or judgment is for £5,000 or more.
If the debtor served with a statutory demand has not complied with it nor set it aside, and at least three weeks have elapsed since the demand was served, then the debtor is presumed to be either “unable to pay the debt owed” or have “no reasonable prospect of being able to pay.” Consequently, an unpaid statutory demand is evidence of the debtor’s inability to pay, and therefore allows a creditor to initiate bankruptcy proceedings.
Charging order over Property
Another route unaffected by the current climate is that a judgment can be enforced by way of applying for a charging order over the Defendant’s properties. A charging order secures the judgment debt against the defendant’s home or other property they own. If the Defendant owns their property jointly with someone else but the debt is only in the Defendant’s name, the creditor can only get a charging order for the Defendant’s share of the property.
A charging order is very serious and upon application the court will grant an interim charge which can later be made final. After the charging order has been made final, the Claimant can usually apply to the court for another order to force the Defendant to sell their home or property so that the Claimant’s debt can be satisfied by the proceeds of sale. This is called an 'order for sale'.
Taking Control of Goods
If you have obtained a judgment in the county court, you can transfer the case up to the High Court to apply for a Writ of Control. This will then enable a Claimant to instruct Enforcement agents to take control of goods to the value of the judgment debt. Whilst the position on this type of enforcement remains largely as before, enforcement officers are not currently able to go inside of a property and so they are limited to seizing goods which are outdoors such as vehicles (providing that they are free of finance).
If you need any assistance on enforcement or would like to discuss enforcement options which are available during the current climate then please get in touch with Josh Millichamp on 01384 889983, or simply call us on 0800 118 1500 to find out how we can help you today.