County Court Judgments - how can DMCs assist?

Intermediaries and those in debt are often unsure what to do when faced with a CCJ, so Debt Management Today spoke to experts within the industry in an effort to discover what debt management companies can do to help.

So what exactly is a CCJ?

A CCJ refers to a County Court Judgment that a county court issues when someone has failed to pay money that they owe.

When a debtor owes money to a creditor, they can apply to the County Court for a judgment against the debtor to reclaim the money. It is up to the Court to decide whether there really is a debt to pay. If there is, a CCJ is issued, which will set out how the debt should be repaid based on a debtor’s statement-of-affairs (income and expenditure).

The court can use various methods to enforce judgments, including a warrant of execution – which results in a court bailiff attempting to seize a debtor’s goods to sell and pay off what they owe, and an attachment of earnings – which forces a debtor’s employer to deduct money from their wages and pay it to a creditor. The court can also enforce a charging order- during which what is owed is taken from a debtor’s property (after paying back any other charge holders e.g. mortgage lender) or a third party debt order – which freezes money held in your bank account so it can be used to pay off the debts.

The process

Before a CCJ is finalised however, there are various points at which a debt management company can intervene and help a debtor.

Chris Cook-Martin, Sales Advisor for Debt Release Direct, explained: “CCJs seem to confuse a lot of people and the reason it has got to this stage is because the client has buried their head in the sand for a long time and then continued to ignore letters from the court.

“A lot of people do not realise they can stop the CCJ even when court proceedings start, mainly because the letters they receive seem to complicate an already stressed-out client. CCJs are often a waste of time because unless an attachment of earnings is put in place (which is rare) then the client can continue to ignore the judgment and not make payments.”

Diane Watson, Special Advisor at Payplan, who are one of the UK's leading providers of free debt advice, explained: “Payplan frequently talk to clients who have either the threat of a CCJ being placed against them or indeed already have one.

“For many people the threat of Court action is frightening, and often people perceive that there will be someone on their doorstep who is intimidating and who will take everything they have.

"At Payplan we explain the Court process clearly to people, advise on how they can deal with the paperwork surrounding a CCJ and advise on a pro rata offer should they be able to make one.We also explain the implications of having a CCJ - the effect on their credit rating, what can happen if they don't maintain the CCJ payments and for some, how this could affect the house that they own.”

So what can be done?

Vance Parsons, Sales Director of DEMSA member EuroDebt Financial Services said: “Negotiation remains one of the most effective methods of dealing with threatened legal action in the early stages and presenting your circumstances and a coherent statement-of-affairs in a standard format like the Common Financial Statement is important.

“Each of your unsecured creditors will want to know that they are being dealt with on a fair basis and that you have made sacrifices in your household budget to achieve this. If a judgement is enforced then we may seek to vary it using a Variation Order based upon what the client can reasonably afford. Taking legal action is costly and most lenders would prefer an amicable solution.”

John Taylor-Groom, Managing Director at Debt Help Direct Limited, tends to specialise in CCJs. He told us: “What you find is people just tend to ignore the paperwork, hope it goes away. Of course it doesn’t and at this stage you find yourself faced with a client who already has a bailiff knocking.”

He continued: “We firstly contact clients and explain the whole process. At this point we usually send them all the likely paperwork and forms they can receive in the process so the client fully understands. We find by doing this we are almost educating the client and future-proofing them from this happening again.

“Once the client can see we know what we are talking about, assisted further by the court documents, then they seem to relax, follow process and, importantly, stick to their monthly payments. We will fill out the paperwork for the client but also explain what will happen if they default, covering areas such as N245 forms, token payments and dealing with bailiffs.”

John Taylor-Groom explained that the company began to specialise in CCJs to ensure that: “the key elements are dealt with, namely, household bills are budgeted for properly, any arrears on household items taken care of – then if you can ensure a CCJ has at least a monthly payment amount accepted by the claimant, then you find the plans tend to run more smoothly, your clients are more appreciative and understanding of their current situation and clients tend to stick to the plan.”

EuroDebt can help a debtor before or after a CCJ action is taken. Vance Parsons said: “Obviously avoidance is the best strategy, by acting on creditor correspondence at the earliest stage before legal action is threatened. So, if you are struggling to meet their payment demands then seek professional advice and that is where a leading debt management company can help significantly.

“We offer face to face debt advice and are able to deal with court paperwork at the client meeting, which is backed up by an experience legal support team with our Client Services operation in Bedford.”

The consequences of a CCJ can be severe. John Taylor-Groom added: “Non-payment of a CCJ can very easily and most often turn into a visit from the bailiff. Even at this stage, if clients were informed you would find that it is generally quite simple to deal with debts.

“The way to ensure clients get the correct help is to complete a very thorough income and expenditure form. If advisers go through this in detail and ask the relevant questions, it is very easy to see which clients have a CCJ and which are on the verge of receiving one.”

Vance Parsons told us that lenders seem to be showing more forbearance to those clients who seek professional debt advice. “This is reflected in a 37 per cent reduction in the number of personal CCJs in the last two years on a monthly volume basis with the average judgement balance being over £3,000.”

Diane Watson continued, “Rarely does someone intend to get him/herself into debt, and if they have had a downward turn in fortune and are no longer able to maintain contractual payments to their unsecured creditors, ending up with a CCJ isn't necessarily the end of the world.

“Whilst no one wants a CCJ, from the Creditors’ point of view this type of action is giving them additional abilities to pursue the debt. If the client is fully aware of why they have got the CCJ and has filled all the paperwork in prior, the CCJ payment should be something that is affordable to them based on their financial statement.”

After talking to industry experts, it appears that some debt management firms are willing to focus on CCJs and are able to help those in debt either before the judgment is passed, or to keep up their payments once a judgment has been issued.

By Miranda Atty

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