I have been receiving more questions from readers regarding bankruptcy and also defaulting on loans and receiving a CCJ/County Court Judgment.
Some are being threatened with being made bankrupt by one of their creditors.
While the threat of being made bankrupt should always be taken seriously, it may be just that a threat. You need to owe someone £5,000 or more in order for them to make you bankrupt. And should they wish to do this, they pay the bankruptcy fees.
However, if you do owe someone over £5,000 and have assets, such as property, then avoiding bankruptcy needs to be a priority.
Many creditors and lenders will not go down the bankruptcy route, but prefer to obtain a CCJ through the courts.
This Judgment against you gives the creditor additional powers to collect the debt, these additional powers are known as Enforcement Orders.
The Various CCJ Enforcement Orders
Once a CCJ has been obtained by a creditor, they can then apply to the court for an Enforcement Order. This is usually a last resort, as many debtors will enter into a payment arrangement via the courts, and a Judge will review and state this is what you can afford to pay, and you make monthly payments.
If you default on that arrangement, then the creditor may seek out an Enforcement Order. This Order gives the creditor a much stronger way to collect what is owed to them.
As you will read, these additional collection tools can be harsh.
The three main ways creditors may use an Enforcement Order are:
Bailiffs: They get a Writ to have Bailiffs sent out to you to determine what items you may have of value, and then confiscate these. They take your stuff.
The use of Bailiffs is harsh and can be a very anxious time for you as a debtor. It is always best to try and avoid this chapter in collecting a debt.
While Bailiffs can take items of value, there are many things they cannot take. They are looking for non-essential items, such as a car (which is not on finance), TV, computers, etc, but not a fridge, cooker, etc. These are essential.
Only in rare instances can a Bailiff force entry into your home, but they are clever in finding other ways.
Charging Orders: Charging Orders would be used if you had property, as what occurs is a Charge is placed against your property. The Charge sits there and when you sell your property, the Charge is paid out of the proceeds.
What a Charging Order does is take an unsecured debt, and make it secured.
A creditor could try to force the sale of the property in order to get their money, but this is very rare. I have never heard of it happening. The Courts are not looking to make people homeless.
Attachment of Earnings: In some instances if you do not have any property or assets, even for a Bailiff to take, but you are working, your only asset are your wages. So a creditor may apply to have a portion of those wages attached and paid to them to recover the money owed to them.
Benefits and pensions cannot be attached.
If you are self-employed, in the service, Army, Navy or Royal Air Force, you are excluded from a wage attachment.
As to how much of your wages will be taken, will depend on how much you earn against the “protected earnings rate”. This allows for most essential bills, rent/mortgage, gas and electricity, food, etc.
Again, it is best to not let non-payment of debts reach these levels of collection.