Enforcement

6. Insolvency Proceedings

6. Insolvency Proceedings

(i) Individuals - Bankruptcy

Before you can apply to make an individual bankrupt, you must first take one of the following steps; either send in the High Court Enforcement Officer or serve a Statutory Demand. If the HCEO fails to recover the debt then he will make a 'nil return' and a bankruptcy petition can then be presented to the court. If you do not want to instruct the HCEO then you can serve the Statutory Demand. It must be served personally on the debtor and has to be for more than £750. The debtor can then apply to the court within 18 days requesting that the Demand be set aside. If they fail to do so, then a Petition can then be presented. The Demand will only be set aside if there is good reason, and if you have already obtained a judgement then the debtor is unlikely to be successful.

A Statutory Demand can be served even if you have not taken any court proceedings or obtained a Judgement. However, the courts do not encourage Insolvency Proceedings as a primary option in debt collection and much prefer a Judgement to be obtained first. You should only consider starting Insolvency Proceedings without first obtaining Judgement if the debt is not disputed in any way. An Insolvency Court will not investigate issues in any detail and the debtor will avoid bankruptcy if they can demonstrate any dispute, no matter how tenuous or flimsy that may be. You therefore run the risk of losing your own costs and having to pay those of the debtor. Please ask for further advice.

Costs

Statutory Demand:

Our fees:

Approx £175 + VAT

Process Server fee:

Approx £100 + VAT

Bankruptcy Petition:

Our fees:

Approx £800 + VAT

Court fees:

£220

Official Receiver's deposit:

£750 (recoverable if Order not made) 

Process Server fee:

Approx £100 + VAT

Counsel's fees:

£200 - 250 + VAT

Time Scale:

Statutory Demand served within 7 days; debtor has 18 days to apply to set aside and 21 days in which to make payment or payment proposals; petition issued once time limit expires and there has been no application to set aside; Hearing listed 2 -3 months after issue.

Advantages

Most effective enforcement method IF the debtor does have the means to pay but is just being difficult. Occasionally service of the Statutory Demand can be sufficient. Can serve a Demand to test the water; you do not have to go through with the Petition.

Disadvantages

  • Most expensive option.
  • The court may decide not to make the debtor bankrupt if they offer instalment payments.

(ii) Limited Companies - Liquidation

Whilst you can instruct the HCEO or serve a Statutory Demand (see above) first, unlike bankruptcy, a creditor can issue a Winding Up Petition immediately. The only requirement is that you give the debtor company 3 clear days notice. You do not need a Judgement although it is much safer to obtain one first. You should only consider issuing a Winding Up Petition without first obtaining Judgement if the debt exceeds £750 and is not disputed in any way. An Insolvency Court will not investigate issues in any detail and the debtor will avoid liquidation if it can demonstrate any dispute, no matter how tenuous or flimsy that may be. You therefore run the risk of losing your own costs and having to pay those of the debtor. Moreover, a Winding Up Petition must be advertised in the press, and as this is extremely prejudicial to the debtor, it may apply for an injunction to prevent you from advertising. These injunction proceedings will be expensive and if the debtor can show there is a dispute, then you are likely to face an order to pay their costs as well as your own. Please ask for further advice.

Costs

Statutory Demand:

Our fees:

Approx £175 + VAT

Process Server fee:

Approx £100 + VAT

Winding Up Petition:

Our fees:

Approx £800 + VAT

Court fees:

£220

Official Receiver's deposit:

£1,250 (recoverable if Order not made)

Process Server fee:

Approx £100 + VAT

Advertising fee:

Approx £65 + VAT

Counsel's fee:

£200-250 + VAT

Time Scale

Stat Demand served within 7 days; debtor has 18 days to apply to set aside and 21 days to make payement or payment proposals; Winding Up Petition listed 2-3 months after issue.

Advantages

Most effective enforcement method IF the debtor does have the means to pay but is just being difficult. Can serve a Stat Demand to test the water; you do not have to go through with the Winding Up Petition.

Disadvantages

  • Most expensive option.
  • The court may decide not to put the debtor into liquidation if it offers instalment payments.