Legal Actions Explained

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Here you will find legal actions described - hopefully understandably.

This is not a legal lesson or is it comprehensive - rather it is intended to guide you through the maze of actions that a creditor can take against you. There are some practical tips on what to do when these actions occur.

The key in all situations is communication. Provided your creditors are kept fully involved and informed most will go along with deals to achieve a satisfactory outcome. In our experience taking legal action is the action of an exasperated creditor (or one with a proper credit control procedure that is rigorously applied).

County Court Summons
Meaning - A creditor has tried to recover their debt from you but without success. You may have offered an informal deal but now their patience is wearing thin.

You may have tried to stave payment off claiming the debt is invalid or issued a counterclaim. They have issued an action to commence recovering their money in the County Court

What can I do, what should I do? - You have time to pay the claim of the creditor. Try to offer a payment deal sensibly before the action will be heard in the court. Try to do a deal or pay the debt. If you cannot pay it look at Am I Insolvent page. If you cannot pay it you could be insolvent.

You can dispute the claim if it can be proven the debt is not correct. Look, carefully, at the forms for detailed instructions on how to defend the claim.

County Court Judgment
Meaning - Having pressed for payment the creditor has now got the court to agree that there is a valid claim for the money. You have 28 days from the date of the Judgment to pay in full plus any costs incurred. Otherwise the Judgment will be registered at the courts and with credit reference agencies.

Remember an outstanding Judgment is proof of your insolvency and allows a creditor to issue a bankruptcy petition. See Am I Insolvent for further details. There were over 193,000 CCJ's issued in 2005 in the UK, so they are quite a common tool to tackle late payment offenders.

What can I do, what should I do? - If possible always try to pay the debt within 30 days of Judgment. This will ensure that the Judgment is "set aside" and will not be registered with credit reference agencies. If you cannot pay it then this of course further proves insolvency. If it is registered then getting credit in future becomes much more difficult

If you are under real cashflow pressure but are attempting to trade out call the creditor/ their solicitor or the bailiff and try to agree a phased payment. Often they will agree but they may use the non-payment to push for further action such as a warrant, distraint or winding up.

You may be surprised at how long a time you can spread payment through this type of deal. Think about it, the creditor just wants paid, even at £25 per week this is better than bankruptcy because they will, inevitably, lose the whole amount in your bankruptcy.

Warrant
Meaning - As the creditor has not been paid under the judgment the creditor can apply to the court for a warrant of execution. If the debtor is in another area the court can forward this to the local court. A notice of warrant will be issued to the debtor. If payment is not made a bailiff of the court can be sent to collect payment or seize goods.

What can I do, what should I do? - As always a deal can be struck with the creditor As always a deal can be struck with the creditor and or the bailiff to repay over time. You have demonstrated an inability to pay the debt and are offering to settle in a period to be agreed. For small debts this is often acceptable to the creditor.

Statutory Demand
Meaning - Usually this action is taken after a creditor has obtained a Judgment. It is a formal demand for payment of an undisputed debt (over £750) - the debt must be paid within 21 days of the demand being issued.

Failure to pay a statutory demand can lead to a bankruptcy petition being issued. In any event, the creditor has to pay to issue this document/action and it is now becoming much more serious.

What can I do, what should I do? - Warning! This action means the creditor is serious about getting the debt paid. If you don't pay the debt in the 21 days they can go to the final step of issuing a bankruptcy petition against you.

If you cannot pay the debt, talk immediately to Debtless, review the contents of this website and make a plan for survival - such as an IVA. Or if this is not appropriate consider what bankruptcy might mean for you.

Walking Possession
Meaning - A bailiff (for the County Court) or Sheriff (for the High Court) has visited your home and obtained entry under a distraint notice. He /she has asked for payment of the proven debt. If you have not paid this plus the court and his costs he can "take possession" of the goods, equipment, fixtures, stock etc on the premises.

Effectively if you do not reach a deal or pay in full he can remove and sell the assets in 5 days. To sell the assets after they are covered in this way is a criminal offence. If the bailiff has obtained a walking possession he can force entry to recover the goods after the 5 day period.

What can I do, what should I do? - Unknown to most people unless in debt; Sheriffs and bailiffs are an unusual breed. They will rely upon ancient laws to obtain entry to your property - such as open doors and windows. But they cannot force entry. Simply: your best defence is to close and lock all doors and windows where they can gain access!

It is also not usually possible for the bailiff to possess or remove goods that do not belong to you.

But in reality isn't this is just deferring the inevitable? You are probably insolvent if a bailiff is calling.

Once walking possession is in place it is STILL possible to do a deal with the bailiff to keep the goods whilst making regular payments - default and he may remove them without notice.

Distraint
Meaning - A popular tool for landlords where rent or other payments are not made. If the landlord has agreed a payment deal and the debtor is not keeping to it the landlord has various powers.

Distraint means that an agent of the landlord can effect entry to remove goods or assets for sale to pay for the debt due. He /she does not need to wait for a long period for this to happen. In theory 1 day to 1 week after a rent payment is due they can distrain. Nor does he/she need a judgment.

What can I do, what should I do? - If you cannot pay the debt, you should really take professional turnaround or insolvency advice.

Proposing an IVA is a solution, but having demonstrated the inability to deal with the cashflow problems are you sure an IVA is viable?

Bankruptcy Petition
Meaning - this is one of the most serious action that can be taken against the debtor. Clearly you have breached any trust the creditor had, deals have failed, cheques bounced and generally you have not kept your word.

See the Bankruptcy page for more details.

What can I do, what should I do? - Other than pay the debt very little. On payment the debt will have increased because of the costs of the plaintiff (creditor). If the action is clearly unfair or an abuse then you MUST take legal advice immediately.

If the petition is fair and indefensible, then in due course the petition hearing will be heard.

Bankruptcy Order

If you feel you can still pay back something with an IVA and don't want to be bankrupt, it’s still possible to exit bankruptcy and propose an IVA, but his is very specialist area of advice. Call Keith Steven now 0800 1956762.

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