Vivien Chow, trainee solicitor
By Vivien Chow, a trainee solicitor in the consumer claims litigation department at Legal Futures Associate Express Solicitors
With the financial climate as it is in the UK, it is increasingly important for creditors to understand all the effective enforcement strategies.
Enforcing a judgment involves compelling a debtor to pay the amount awarded by the court.
And once the court issues a judgment in favour of the claimant, the onus is on the claimant to pursue enforcement.
According to the government’s civil justice statistic, there was an 18% increase in judgments being entered into from October to December 2023, compared to the same period in 2022, with 93% of these being default judgments.
But enforcing a judgment can be a complex process, so in this article I’ll explore the methods for people tracing and the ways to effectively enforce a judgment.
What is people tracing?
People tracing uses investigative methods to locate elusive individuals, ensuring enforcement actions can proceed effectively.
It is one of the first things to consider, as locating the debtor and gathering as much information as possible about the debtor will be beneficial when exploring the best way to enforce a judgment. People tracing services use various methods to find individuals who have moved or are intentionally avoiding creditors:
Social media, Google searches and Companies House
Conducting social media, Google and Companies House searches can be helpful in tracing a debtor. Looking through a defendant’s public Facebook posts and photos, for instance, may provide creditors with an indication of the debtor’s quality of life and assets.
Also, LinkedIn can be used to find out about the debtor’s employment details, giving creditors an indication of their means to pay the debt.
Google searches may also provide information, such as news articles about crimes the debtor may have been involved in and whether they are incarcerated etc.
And Companies House is a quick way to find out whether your debtor owns their own company and its financial statements.
Subscribing to databases
Trace IQ is an online tracing and investigation system, allowing creditors to find information about debtors and their potential addresses. This is especially helpful if your debtor has moved and you cannot locate them.
These databases can be expensive and may not provide the debtor’s current address. However, they can be extremely useful, as the information required to search Trace IQ is simple: the debtor’s full name, date of birth, telephone number and email address.
Tracing agents
Hiring tracing agents is often a good way to trace your debtor. There are organisations, such as Tremark Associates, that specialise in debt collection and can offer valuable expertise. Prices start from £65 for a positive residential trace; there is no charge for unsuccessful traces.
General enquiries agents
This method is extremely useful for personal injury law firms, where a client is approaching the limitation date and it is proving difficult to contact the client. BNH Associates, for example, can contact the clients and obtain outstanding signatures on behalf of their clients. They also provides asset report services, helping creditors establish an idea of the debtor’s assets and whether they are worth pursuing.
High Court Enforcement (HCE) traces are also a cheap and cheerful way for creditors to determine the recoverability success of a debt they are owed. HCE charges £45 + VAT for any positive traces and again there is no charge for an unsuccessful trace.
Once a debtor has been successfully located through people tracing, the creditor can proceed with enforcing the judgment.
Methods of enforcement
Here are the following ways to enforce a judgment:
Instructing bailiffs
Instructing HCE officers for debts over £600 and county court bailiffs for under £600 can prompt debtors to pay so as to avoid the inconvenience and embarrassment of having their possessions seized. Bailiffs have the authority to seize and sell a debtor’s goods to satisfy the debt.
The cons of instructing bailiffs are that there may be a limitation on recovery. Specifically, the asset value of the seized goods may not cover the full amount of the debt and bailiffs have limited power. If a debtor refuses to open the door, HCE cannot make a forced entry into the debtor’s property.
Charging orders
Creditors can secure their debt by registering their debt against the defendant’s property. The advantage is that it reduces the risk of non-payment, as the debt is tied to a tangible asset and an order for sale can be made to the court.
The disadvantage, however, is that, if the debtor has numerous charges secured on the property, there may not be enough equity in it to repay the debt.
Also bear in mind that creditors will not receive immediate payment but it will be once the property is sold or refinanced.
An order to obtain information
This means summoning the debtor to court to answer questions about their financial situation. It provides the creditor with comprehensive information about the debtor’s assets, income and financial obligations, which will assist in deciding the best enforcement option.
It puts pressure on the debtor to settle the debt, as there are sanctions for non-compliance, such as penalties and other legal consequences.
But scheduling a court date and personal service can take a while, delaying the enforcement process. If the debtor has limited assets, the information provided may not assist in debt recovery.
Third-party debt order
This freezes and seizes money owed to the debtor by a third party. This means there is less risk that a debtor will try and evade payment.
This is particularly effective where the debtor has significant funds in their bank account and it encourages them to repay the debt, due to the inconvenience of freezing and seizing their accounts.
The downsides are that it only works if the debtor has sufficient funds in their bank account, these types of applications can take time and third-party debt orders require personal service, which can delay the process further.
Attachment of earnings application
This is an order to recover debts by deducting payments from the debtor’s wages or salary. There is a lower risk that a debtor will evade payments or prioritise other debts as it is directly deducted from their pay. Furthermore, creditors will receive consistent payments, providing a predictable flow of funds to satisfy the debt.
But, on the flipside, the debt recovered may be limited if the debtor is unemployed or you don’t hold the relevant information about their employment. If the debtor is regularly changing jobs, the attachment of earnings process would need to start again with the new employers.
Insolvency/bankruptcy proceedings
The pros of starting insolvency/bankruptcy proceedings are that the debtor’s liquidated assets can be used as a source of funds to repay creditors and the threat of initiating these proceedings puts pressure on the debtor.
The main drawback, however, is that initiating this can be costly. There is also a level of uncertainty, as the debtor may have few or no assets, so the costs of proceedings may outweigh potential recoveries, leaving creditors with little or no return.
Enforcement strategies
Enforcing a judgment can prove to be difficult for litigators working in a personal injury law firm, especially if you have exhausted the people tracing options and are looking for alternative solutions. There are some helpful tools and strategies out there, such as:
- Asking the county court to search the Attachment of Earnings (AOE) Index. There is no financial commitment to this and simply completing an N336 form to the court to search the AOE index can show whether the debtor has an AOE order made against them. This helps creditors identify the debtors’ employers or income sources to facilitate the recovery of outstanding debts.
- Land Registry searches are a cheap method (£3) to find out whether the debtor’s home belongs to them. This will help in deciding whether you want to make a charging order over the debtor’s property and subsequently make an application to the court for an order for sale.
- An order to obtain information is a good tool to consider if, after extensive research into tracing your debtor, no useful information is found. The debtor will be summoned to court and questioned about their financial situation. Should the debtor fail to comply or attend, they could face imprisonment or arrest.
Rights to bring a claim against an insurer
In certain situations, a claimant may have the right to enforce a judgment directly against an insurer, rather than the defendant. This is particularly relevant when the defendant is insolvent or otherwise unable to satisfy the judgment.
The main legal framework governing this right is the Third Parties (Rights Against Insurers) Act 2010, which provides a direct transfer of rights so that, when an insured party becomes insolvent, their rights against the insurer transfer to the third-party claimant.
Furthermore, the Act simplifies the process by allowing the claimants to directly engage with the insurer.
In summary, debt enforcement can be a very complicated process indeed. Navigating the complexities requires a tailored and strategic approach and investing in the right channels and conducting basic research is key to success.
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