You may think it will never affect you, but do you have a plan for dealing with County Court Judgements (CCJ)?
Even when a business is cruising along nicely, it might not take much to knock things off track. Lost customers, unpaid invoices, increased outgoings, can all combine to disrupt cash flow, which can leave you in the unenviable position of being unable to fulfil some financial obligations. In those circumstances your creditors might opt to take you to court, to try to force you to pay. If they win their case, a county court judgment (CCJ) – which means the court has formally decided you owe the money – will be issued.
Figures show that CCJs issued to businesses in the UK have been rising for a number of years. In 2021, 90,696 CCJs were issued, rising to 126,618 in 2023. In the second quarter of 2024, the most recent figures available at time of writing, there was an increase of 36% in corporate business judgments (in England and Wales) compared to the same period the previous year.
So, in these ‘interesting times’, what should you do if cash flow dries up and the threat of debt recovery action looms? Here are our tips:-
Take the Initiative
You know if you are in trouble long before things get to court. Tempting as it might be, don’t ignore reminders and demands. Get as full an understanding of your financial situation as possible and contact the people you owe – communication is key. Aim to negotiate additional time to pay, or perhaps an arrangement to pay in instalments. Try to avoid things going any further.
What Happens Next
There is a process to be followed when action is to be taken through the courts. If no agreement is made with the creditor and they decide to take action, you will first receive a letter of claim, and you will have 30 days in which to respond to that.
If that is ignored or no agreement is reached, you will be sent a claim pack by the court. It will include the date by which you must respond, which should be at least two weeks from the date you receive it, plus forms you can use to explain the situation, or refute the claim if you don’t agree with it.
If you don’t respond, the case will go to court and, if the judgment goes against you, you will receive a CCJ.
Dealing with a County Court Judgement
If you do receive a CCJ, deal with it straight away. It can feel intimidating and uncomfortable – as can the entire process – but don’t ignore it.
The judgment will set out how much you owe, how you should pay, the deadline for making payment, and who you should pay.
If you are unable to make payment in full, you can ask to ‘vary’ the judgment, which means to change the terms such as how and when you must pay, or you can ask to pay in instalments. (If you don’t owe the money, or dispute that you do, then you have other options.)
If you are able to make payment within one month, then you can apply to have the judgment removed from the register of judgments and also from your credit record. You’ll need to write to the court, including proof of payment from your creditor.
If you don’t pay within one month, the judgment will stay on your credit record for six years.
If you pay after one month has elapsed, you can have the judgment marked as ‘satisfied’ in the register of judgments, so anyone checking knows you have paid in full. This might help mitigate the impact of having the judgment on file.
If you don’t pay, then the creditor can apply to the court for help with enforcing the judgment, which could result in bailiffs visiting your premises.
The Impact of a County Court Judgement
Having a CCJ on file can make borrowing more difficult and more expensive. It can also mean that suppliers are unwilling to extend credit facilities and insist on payment in advance. Additionally, you might find that some people or businesses are unwilling to do business with you. And remember, this will have an impact for six years. After that time, even if unpaid, it will be removed from record.
The most important thing if you face financial difficulties is to talk to the people you owe money to. Most people would rather wait a little longer and/or get paid in instalments than go to the expense of taking action to pursue the debt through the courts.
If it does get to that stage and you receive a CCJ, don’t ignore it. This really is one of those cases where you must take swift action, because once that ball has started rolling, it will keep on going, and the results could be costly.