Debt recovery webinar – getting your money

More than 150 people tuned into Birketts’ webinar offering vital advice on debt recovery and how individuals and businesses can recover their money in the rapidly changing COVID-19 landscape.

Partner Andrew Rush led a team including Senior Associate Josh Ripman, Solicitor Sophie Clarke and Head of Debt Recovery, Robert Howard, going into the details surrounding the end of a ‘grace period’ for businesses affected by the pandemic, the appropriate use of winding-up petitions and applications for summary judgement, and what you can do to make sure your debtors pay promptly.

Winding-up petitions and statutory demands

Opening the webinar was Josh, who outlined the benefits of winding-up petitions when pursuing an undisputed debt, but pressed home the importance of providing evidence that the debt is undisputed.

Josh said: “You do not need to serve a statutory demand before serving a winding-up petition and very often doing so will only serve to make life more difficult if you subsequently want to issue a winding-up petition. Generally speaking, we will only advise you to submit a statutory demand if there is any uncertainty over whether the debt is genuinely disputed or not. Serving a statutory demand can sometimes flush out the debtor companies assessment of the debt.”

A recent piece of legislation, the Corporate Insolvency and Governance Act 2020, which came into effect on 26 June 2020, means that courts are not currently issuing winding-up petitions unless the petitioner, the person who owed the money, can demonstrate to the court’s satisfaction that COVID-19 has not had a financial effect on the debtor company. This legislation effects the issuing of winding-up petitions until 30 September 2020.

Josh added: “If the Government does not push that date back, get your winding-up petitions ready because I believe the courts will be very busy.

The court deals with claims on an as-received basis. If you are thinking of taking one of your debtors to court then get on with it, because if you get caught up in the rush that is going to happen very soon you could be waiting some time.”

Josh also walked potential claimants through two of the three stages of the court process (pre-action and court proceedings) for those dealing with disputed debts.

Summary Judgment applications

Sophie explained the benefits of a Summary Judgment application, which can save the costs and time of court proceedings if a claim is found to have no real prospect of succeeding or being successfully defended. Available to claimants and defendants, evidence can be submitted to the court prior to a hearing and a judge can order judgment of the whole or part of a claimant’s claim, the dismissal of the whole or part of a claim or the dismissal of the Summary Judgment application itself.

Sophie said: “Summary Judgments are a really useful mechanism where a party to a claim can seek early determination of that claim. It allows a party to apply for the disposal of part or the whole of a claim without a trial on the basis that the claim or part of a defence has no reasonable prospect of success or there is no other reason for a trial.”

Enforcing a judgement

Head of Debt Recovery Robert Howard went onto explain what options are available when collecting debts. One of the best-known options are High Court Enforcement Officers, or bailiffs. While they have no powers to break into a private residence, they are able to enter any commercial properties to collect payment or repossess goods to settle the outstanding debt, but regularly have to take goods worth more in total than the debt being collected.

Robert said: “Bailiffs have to sell at public auction with no reserve. They no idea of the value the goods will reach at auction so they have to take as much as they can to cover any shortfall.”

Other options Robert outlines are Third Party Debt Orders which are collected from a debtor’s bank account on the day it is made, Charging Orders which are placed on a debtor’s property, and Attachment of Earning Orders, which can be placed on an individual in full-time employment.

Robert added: “It’s very important the names of the debtors match the orders. If you have a Third Party Debt Order for John Smith and the account is in the name of John and Susan Smith, then the order will fail.

The same is true of Charging Orders. If an order has the name John Smith, but the Land Registry shows John Peter Smith owns a property, the order will fail, as it could well be a different person, such as a father or a brother. A Charging Order is only a security on the property so it is a long-term solution. You have to wait with your charge on the property until the debtor attempts to sell or is repossessed.

The Attachment of Earnings Order includes a Protected Earnings Level, fixed by the court, so an order cannot be made lower than this level. Therefore, if you have a low earner, you could well end up with an order of as little as £5 per month.”

You can view the full webinar on Birketts’ YouTube channel.

If you would like to learn how Birketts can help you recover your debts, speak to our debt recovery specialists.

Birketts’ upcoming webinars can be found on our Events pages.

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