In the UK, creditors have several legal proceedings available to them to recover debts. These include:
- Letters Before Action (LBA): This is a formal letter sent to the debtor demanding payment. It is a prerequisite before commencing most types of legal action.
- County Court Judgments (CCJ): Creditors can file a claim in the county court. If the debtor fails to respond or loses the case, the court issues a CCJ against them, which mandates them to pay the debt.
- Statutory Demand: This is a formal demand for payment within 21 days. Failure to comply can lead to bankruptcy proceedings or winding-up petitions against companies.
- Bankruptcy Proceedings: If a debtor is unable to pay their debts, a creditor can petition for their bankruptcy. This is a serious step usually taken for significant debts.
- Winding-up Petitions: For corporate debtors, a creditor can issue a winding-up petition. If successful, it leads to the compulsory liquidation of the company.
- Enforcement Actions: Once a CCJ or another court order is in place, various enforcement actions can be taken, such as seizing assets, garnishing wages, or appointing a receiver.
- Charging Orders: This legal tool allows a creditor to secure the debt against the debtor’s property, such as their home.
- Third Party Debt Orders: This orders a third party, like a bank, to pay the creditor directly from the debtor’s account.
- Attachment of Earnings Order: This is a court order requiring the debtor’s employer to deduct a certain amount from their wages to pay the creditor.
Each of these methods has its own procedures, costs, and suitability depending on the circumstances of the debt and the debtor. It’s advisable for creditors to seek legal advice to determine the most appropriate course of action.