03 January 2014
Unpaid debt: Issuing a claim
Article relates to Unpaid debt: statutory demand or claim form?
This involves setting out the details of the debt in a Claim form and then issuing the Claim Form at court and serving it on the debtor. The 'end game' would be to obtain judgment against the debtor. This is a 'private remedy', specific to you as the creditor.
Once the claim is served, the debtor may decide to pay the debt; dispute the debt; and/ or attempt to negotiate a deal. If the debtor does nothing at all, you can ask for a 'judgment in default' from the court.
If the debtor defends your claim but the defence has no merit, you can make an application for 'summary judgment' (i.e. a quick judgment in your favour, without a full trial of your case) from the court. This is only likely to be granted if the court feels that the debtor has no real prospect of successfully defending the claim. The alternative is for the matter to proceed to a full trial.
If you are able to obtain judgment against the debtor in most cases this will result in a payment. However, if the debtor (now a 'judgment debtor') still fails to pay, then your judgment (again, your private remedy, specific to you and no other creditor) can be enforced in a number of ways, such as:
- instructing a High Court Enforcement Officer to seize the debtor's assets;
- applying for a charging order against the debtor's property;
- applying for a Third Party Debt Order, to redirect funds owed to or belonging to the debtor into your account; or
- applying for an attachment of earnings order, to intercept and redirect a proportion of the debtor's salary into your account.
Advantages of issuing a claim:
If court proceedings are commenced and the debtor either offers no defence, or a poor one, it is possible to obtain judgment very quickly. If the debtor still fails to pay, the law empowers you to take a number of effective measures to extract the payment from the debtor's assets and earnings.
Most importantly, however, issuing a claim form for a judgment gives you a private remedy, which you can enforce ahead of any other creditors who do not have a judgment. This is hugely helpful where a debtor has limited assets and a number of debts to pay.
Disadvantages of issuing a claim:
Litigation can be expensive, protracted, and unpredictable and costs can sometimes be disproportionate to the amount in dispute. It is therefore advisable to take professional advice from the outset and carry out a careful cost-benefit analysis before starting the process.
You should consider your relationship with the debtor; issuing proceedings against them is likely to destroy any prospect of any ongoing, commercial relationship.
Option 2: Unpaid debt: insolvency proceedings