What creditors are allowed to do to get their money back
If debtors are unable to reach an agreement with their creditor to pay back the money they owe at an affordable rate, the creditor’s main legal option to get their money is through a ‘money-only’ claim in the County Court.
Before taking a debtor to court, the creditor should send them a warning letter, informing them that, unless they pay the money back, they will commence legal action within a certain period of time. If they do go on to commence legal action, the debtor should receive a claim form and response pack giving details of the claim and asking the debtor whether or not he accepts that he owes the money. The creditor can also claim interest on the debt owed, which will be charged up to the date when the court order is made.
If the debtor agrees he owes all the money due
If the debtor agrees that he owes all the money detailed on the claim form, he will send an admission form back with details of his financial situation, usually offering to pay the debt off in instalments. If the creditor is happy with this offer, they can ask the court to make an order to this effect without a court hearing. The court will then enter a County Court Judgment in the Register of Judgments.
If the creditor does not accept the debtor’s repayment offer, a court official will decide what is fair, usually without a court hearing.
If the debtor accepts that he owes all of the money, but doesn’t make a repayment offer, the creditor can decide how much and when he should pay. Alternatively, the creditor may ask for an order that he pays the whole amount immediately.
If the debtor defends the claim
If the debtor does not agree to the debt claimed by the creditor, he will defend the claim, providing legal reasons for doing so. The court will then decide the matter.
If the debtor ignores the claim form
If the debtor does not respond to the claim form within 14 days, the creditor is allowed to ask for a judgment in default, which means that the debtor will not have a chance to put his case to court and the creditor can escalate the claim. The creditor can also decide in these circumstances how and when the money should be repaid. Once the court order has been made, it will be entered into the Register of Judgments, Orders and Fines.
What if the debtor still doesn’t pay following a court order?
If the creditor obtains a court order against the debtor, the debtor must pay what the court orders. If he refuses to do so, or ignores the court order, the creditor can take enforcement action. This will require another order from the court, which may involve:
- A warrant of execution: sending bailiffs to the debtor’s house to seize and sell the debtor’s goods to pay the judgment debt and costs and the costs of enforcement.
- An attachment of earnings order: this compels the debtor’s employer to make regular deductions from the debtor’s earnings and pay them into court.
- Third party debt order: where a third party owes money to the debtor, the court can order the third party to pay the creditor the whole of that debt, or enough to satisfy it.
- A charging order: the debt can be secured against the debtor’s home, so the debtor could lose it if he doesn’t keep up repayments.
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