How to react to a County Court Judgment
Updated: Feb 16
It can be an alarming moment when a County Court Judgment lands on a company’s doormat. What does it mean? Should the company pay it straight away? How can it be challenged?
A County Court Judgment (CCJ) means the court is ordering the payment of a sum owed to a creditor. The CCJ will include details of the amount owed, who the creditor is, how to pay, and the date by which the payment must be made.
Why has a CCJ been issued?
If a creditor has made attempts to recover monies they consider are owed to them, and there has been little or no response from the debtor company, the creditor may take further action.
The creditor will issue a County Court Claim to try and recover their debt. A response is required within 14 days, although the company can request a further 14-day extension period to file their Defence by completing and sending to the Court what is known as an
Acknowledgment of Service Form.
If the company files neither an Acknowledgement of Service nor a Defence, the creditor can apply to enter judgment; this is known as a “Default Judgment”.
When there is the threat of a CCJ, the affected company needs to act quickly or they may find that things become very complicated and the consequences for the business can be grim indeed.
Paperwork sent to the company by the court should be completed and returned as quickly as possible.
If creditor negotiations aren’t likely to come to a positive conclusion, or if the company intends to dispute the debt, it’s vital that they seek professional advice as soon they can.
How can a CCJ be set aside?
The CCJ is registered within days of it being issued – it can then be removed from the register if it is satisfied within 30 days and the company wishing to have it removed contacts the Court with proof of payment and pays a fee for removal, currently £15.
If a company believes that the debt is not due or that it did not respond to the claim as they did not receive the papers, they can apply to have the CCJ set aside.
This can be done by sending an application to the court (the relevant form is Form N244) together with a fee, currently £255 (court fees are reviewed from time to time and are subject to change). On the form, the company needs to explain the reasons behind its application, including any relevant supporting paperwork.
When considering any such application, the court will want to see that:
1. the company has acted promptly in making their application;
2. they have a good reason for not responding to the claim; and
3. they have reasonable prospects of successfully defending the claim.
These factors should therefore be addressed in the application form.
Depending on the strength of the company’s case, it may have to attend a hearing that will give it a chance to explain the reasons for its disagreement with the CCJ.
The Court may decide to set the judgment aside if the company’s case for this is strong, in which case the claim will still be heard, and the company will be given the opportunity to defend the claim. However, should the Court decide that the grounds to set the judgment aside are not met, then the CCJ will stand, and the company will need to make payment of the judgment as above.
If the court decides that the company owes something but not the whole amount of the original CCJ, it will issue a new CCJ for the correct amount.
Paying by instalments
Many creditors are reasonable people and early contact to arrange payment by instalments may well succeed. Explaining the reasons behind non-payment may lead to the creditor agreeing to freeze interest or accept a smaller amount.
If the debt is agreed by the company, arrangements should be made to pay it before the deadline. A company that admits the debt but can’t afford to pay can apply to the court for an order that it be allowed to pay by instalments.
The application should set out income and expenditure details and the company should give an idea of how much it is able to pay each month.
If the creditor agrees, the CCJ will be drawn up to include the monthly repayment. If no agreement from the creditor is forthcoming, the court will make the decision on a fair monthly payment.
Until the application is processed, the company should continue paying against the debt to ensure that the creditor does not decide to take enforcement action.
If the company doesn’t deal with the CCJ when it’s issued, their creditor may well proceed with enforcement action. This could mean sending in the bailiffs to collect the debt. Recent reality TV shows give a good idea of what this involves. The debtor company will get a warrant advising that the bailiffs are going to visit and that the company has seven days in which to pay the debt. If the company responds to the warrant with an offer to repay, either by instalments or in full, the warrant will be stopped.
If the business owner is a home owner, the creditor could take steps to secure the CCJ against their property. They could also apply to the court and ask that the debt is repaid by monthly instalments directly from the debtor’s salary or bank account. This will not be the case where the debtor is a company.
If the debt is higher than £5,000 for an individual or £750 for a company, the creditor can apply to make the debtor bankrupt or wind up the company – this will usually happen if the individual or company has failed to deal with a statutory demand three weeks after it has been served or there has been an unsatisfied attempt to execute against the debtor’s assets by the bailiff/High Court enforcement officers.
It can be seen from the foregoing that there are several ways that a business can deal with a CCJ but ignoring it and hoping it goes away isn’t one of them. It could have serious consequences if the creditor decides to escalate matters.
How long are CCJs kept for?
CCJs are kept for six years on a list known as the Register of Judgments, Orders and Fines.
If the company pays the sum within one month of the CCJ having been issued, its name will be removed from the register. However, if the sum is paid after one month, the CCJ will be marked as ‘satisfied’ but it will still remain on the register for the six-year period, with all the adverse inferences that may be made.
Long-term effects of a CCJ
A CCJ on a company’s credit file means that they will find it hard to trade as they have done in the past. It can affect business and cause a company’s financial situation to deteriorate further; suppliers will be reluctant to offer terms of credit and lenders may well restrict the amount of borrowing that is available to the company.
If the same bank administers the company account and the director’s personal accounts, the director may find that their borrowing capacity with their bank is affected.
It is therefore crucial that the company deals with any such claims promptly on receipt and does not ignore any court paperwork to avoid a CCJ being entered against them.
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