The first question that should be asked before initiating court proceedings against a debtor is whether obtaining payment from the debtor is realistic. A court judgement or enforcement proceedings will likely to be not worthwhile if the debtor lacks assets. Even if the debtor does have assets, they may still not be worth pursing if they are further depleted by incurring legal costs. On the other hand, if the debtor does have assets, the best enforcement method can be considered by learning as much as possible about those assets.
The Debt Landscape
The Money Charity statistics help to provide a snapshot of what is happening in the world of debt. Using December 2023 as an example:
- 2580 consumer County Court judgements were issued every day between April to June 2023.
- The Citizens Advice Bureau dealt with 1,083 new debt problems every day in the year to November 2023.
- A total of 6.8 properties are repossessed every day.
- 279 people a day are declared insolvent or bankrupt.
These statistics are important because they show that there may be a high chance that whilst you are enforcing the payment of debt, the debtor has a line of other creditors attempting to do the exact same. Unless the debt is secured there is no priority and without proper due diligence the risk of throwing good money after bad is significant. This is especially the case with the ‘Won’t Pay’ as opposed to the ‘Can’t Pay’ debtor, however, the Won’t Pay’s can be overcome with rigorous action and good advice.
Knowing your debtor
Having an in-depth knowledge of your debtor’s asset profile is important in successfully recovering money owed. An investigation should be done before commencing proceedings. We can utilise a number of third parties (listed below) to carry out due diligence.
Individual debtor:
- A search of the Land Registry can be undertaken to ascertain relevant property information: is the property wholly or jointly owned, leased, or are there any charging orders on it already? A property with many charging orders against it may suggest the debtor may be difficult to successfully enforce the judgement against. Any outstanding mortgages on the debtor’s property will also be revealed.
- A search of the Individual Insolvency Register can reveal if an individual is subject to bankruptcy proceedings. It will declare if an individual is currently subject to a Debt Relief Order, an Individual Voluntary Arrangement or Fast Track voluntary arrangement with their creditors.
- For a small fee, perform a search of the Trust Register Online to reveal if the debtor has a County Court Judgement registered against their name or are subject to a fine by the court.
- A quick social media and internet search can reveal if the individual is currently trading and may have an alternative source of income.
Company debtor:
Limited company or Partnership
Company debtors are not always ‘cannot pay’ debtors for there are opportunities for ‘won’t pay’ debtors too. Fortunately, a search of Companies House can reveal accessible information about a limited company or partnership.
- If there are any fixed or floating charges registered against the company, these will be filed with Companies House. Again, the presence of existing creditors such as a bank or another financial institution, may make recovery more difficult.
- Publishing company accounts is a requirement for registration with Companies House. The profitability of the company can then be assessed.
- Undertaking a search at the Land Registry will show whether the debtor is the registered owner of any lands or buildings. Any mortgage or charge over the property will also be revealed.
- Telephone the Central Registry of Winding up Petitions 0906 754 0043 to see if there has been a petition to find up the company. If they have, you may be able to declare your interest in any assets.
- Search the London Gazette to discover whether a company has gone into liquidation.
- The tracing of assets via asset tracing services can help reveal efforts to hide assets from discovery.
- Social media and information online can be helpful in determining whether the debtor is in any financial difficulty. For example, a recent news article congratulating the debtor on opening a new restaurant or receiving a significant grant may suggest otherwise.
The more information we know about a debtor, the higher the chance of successful debt recovery. If you are struggling with debtors or would like some advice on recovery then please do contact one of the DebtLink team.