The Financial Conduct Authority’s
recent survey (Financial Lives 2017) found that personal debt levels in
Northern Ireland are the highest in the UK, with adults owing £670 more than
the national average. The survey also revealed that Northern Ireland also had a
lower proportion of savers, with 67% of people reporting they had either no
savings or less than £5,000. These figures don’t appear to be improving.
Combined with the effects of the Insolvency (Northern Ireland) Order 1989 (Amendment) Order (Northern
Ireland) 2016, which raises the level of debt that
must be owing to a Creditor before they can petition for an individual’s
bankruptcy from £750 to £5,000, it
may make successfully recovering debts owed by individuals more difficult.
It may therefore be prudent for Creditors to undertake
credit checks against their potential customers prior to entering into any
contract, or once a bad debt has accumulated, secure a ‘worthsue’ report prior
to issuing proceedings, in an attempt to ascertain whether the debtor would be
able to pay any judgement, so as not to “throw
good money after bad”.
If internal chaser letters or indeed a solicitor’s pre-action letter does not provoke a positive response, Creditors have two options to recover the debt:
- Statutory Demand if the amount is in excess of £5,000 for an individual or £750 for a company
- If the debt is not paid within 21 days, and no dispute received, the creditor can petition for the debtor’s bankruptcy/company to be wound up
2. Issue Court proceedings
- Small Claims Court up to £3,000
- County Court £3,000-£30,000
Which method to utilise depends
on the individual factors of the case, for example, how much is the debt, will
the debtor be reluctant to be made bankrupt/company wound up, is the debtor
likely to challenge the debt is owed.
In reality, most Creditors don’t
want to expend monies winding up a company or making an individual bankrupt,
and whilst court proceedings are more expensive and time consuming, if
successful, you will have a decree against the Debtor upon conclusion.
Again, the Decree can be enforced via a number of methods, namely:
- Statutory Demand if the amount is in excess of £5,000 for an individual or £750 for a company– now no dispute can be raised that the debt is not owed
- The Enforcement of Judgments Office (EJO)
The EJO has a number of powers to enforce
payment of a debt under Article 13 of the Judgments Enforcement (Northern
Ireland) Order 1981, as follows:
- Attachment of
Earnings Order i.e. deductions made by an employer from a person’s wage or
salary
- Instalment Orders,
where fixed payments are required until the debt is paid
- Orders Charging
Land, which remain on the property for 12 years, and must be satisfied prior to
any sale
- Order of Seizure –
where the EJO enter the debtor’s premises and seize property to sell at auction
- Orders Appointing
Receiver, where the EJO intercept money due to the debtor
- Garnishee Orders,
where the EJO take money directly from a debtor’s bank account
However, it may be that in future Alternative Dispute Resolution will play a larger part in resolving debt recovery disputes, given the above problems, the High Court’s stance on mediation, and indeed the need for many businesses to continue to trade with the other party to a dispute.
