Simple Guides

What steps apply in the Debt Collection process in both Jurisdictions?

Initial demand letter to debtor. This letter to the Debtor will threaten legal proceedings unless payment is received within a prescribed number of days (usually seven or ten days).

Issuing legal proceedings

If a satisfactory response hasn’t been received from the Debtor in that period, proceedings are issued in Ireland in the District, Circuit or High Court, depending on the amount of the debt which is due. Proceedings are issued in Northern Ireland in the Small Claims Court, the County Court or the High Court, likewise depending on the amount of the debt which is due. The Debtor has more time to respond and will either pay up, ignore the notice or decide to dispute the case.

Small Claims Courts

It should be clarified that where only a small amount of money is due (Northern Ireland < £3,000) then the Creditor is entitled to avail of the cheaper Small Claims procedures provided by the Courts Services. Debts are excluded from the Small Claims procedure in Ireland, which deals with consumer complaints; claims for debts of under €15,000 in Ireland are issued in the District Court. For further information in the Northern Ireland Small Claims process, see: https://www.courtsni.gov.uk/en-GB/Services/Online_Services/Pages/default.aspx

European Commission procedures

The European Commission is also making provision for mediation in Cross-Border Debt Collection disputes.

For more information, see:

http://ec.europa.eu/justice/civil/index_en.htm

The European Small Claims Procedure (ESCP) Regulation 861/2007

The ESCP offers a standardised method for EU crossborder low value claims (less than €2,000). It offers a speedy way of obtaining a judgment as once the court dispatches the claim form to the defendant they have 30 days to respond. Once the court has received the response and any other necessary information it has 30 days to make judgment.

ESCP judgments are recognised and enforceable in other EU member-states without the need for a declaration of enforceability. For more information, see:

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV:l16028

Judgment

If no response is given either way, then a Judgment (a sworn statement outlining the debt owed and by whom) against the debtor is issued.

There are several options for enforcing this Judgment:

Republic of Ireland

A Garnishee Order

This is an Order against a third party who holds money owed to or belonging to the Debtor and ordering that Third Party to pay the Creditor out of that money.

Judgment Mortgage

This Judgment can be registered as a mortgage over any land or property owned or part owned by the Debtor. It prevents the property being sold and the Creditor has the right to have the property sold off and the proceeds used to pay the debt.

Lodgment of Judgment with Sheriff

The Sheriff will attempt to seize debtor’s assets. Proceeds from the sale of assets to cover the money owed will go to the Creditor via his solicitor.

Installment Order

Depending on the financial circumstances of the Debtor a Court Order can rule that a debt may be paid off in installments. Procedures involved are the Summons for Attendance of the Debtor (to be examined as to his Means), the Installment Order and in turn the Order for Imprisonment of the Debtor. Before however a Debtor is imprisoned for failure to discharge a debt the Judge of the District Court must be satisfied that failure to pay is not due to the debtor`s mere inability to pay and he must also be satisfied that the debtor has no goods which could be taken in execution under any process of the court (e.g., seizure of goods by the Sheriff). Procedures are strictly laid down under the District Court (Enforcement of Court Orders) Rules 2010.

Attachment Order

This applies where it appears that the debtor has no assets but is owed a debt by a third party. A creditor can seek an attachment order in respect of that debt.

Bankruptcy

This applies only when the Debtor is an individual and the debt is very large. It usually means that the Debtor will lose everything he/she owns.

Liquidation/Winding Up

This applies where the Debtor is a limited liability company leading to the assets of the company becoming vested in the Receiver/liquidator who is required to sell the same and pay off all the Creditors.

Some of these procedures are described in greater detail in the next section on enforcement of judgements in Northern Ireland.

Northern Ireland

Once the Creditor has obtained Judgment, he has two options. They are:

  1. Enforcement of the Judgment through the Judgments Enforcement Office
  2. Bankruptcy proceedings

What the Enforcement of Judgments Office does

The Enforcement of Judgments Office (the EJO) is a branch of the Courts Service responsible for enforcing all judgments in Northern Ireland in all ways except through Bankruptcy proceedings. Once a Judgment is registered with the EJO, an officer is specifically assigned to enforce the debt. Initially, that officer will make an investigation into the Debtor’s means. As part of their investigatory powers, the EJO can summons a Debtor to the Magistrates’ Court to provide evidence about his means. Failure to answer that summons can result in the debtor going to prison.

Once the officer has enough information about the Debtor, he will decide which method of enforcing the Judgment is appropriate. He can do any of the following:

Warrant of Execution

By this method, a Bailiff is ordered to seize all goods and chattels belonging to the Debtor. The Bailiff then sells them and the proceeds are applied towards the Judgment debt. The only items, which cannot be seized, are the tools of a person`s trade and their bedding and clothing.

A Charging Order on land followed by an Order for Sale

This is a two-stage process. Stage 1 – obtaining a Charging Order – is an end in itself, because it virtually guarantees payment of the debt at some time in the future. A Charging Order is an order that the land is charged is like a mortgage. The Charging Order will not take priority over an existing mortgage or charge but will take priority over any later charges. The house or land cannot be sold with a good title until the charge is paid. A solicitor acting for a buyer would find out about the Charging Order by making a Registry of Deeds or Land Registry search during the conveyancing process. Stage 2 – obtaining an Order for Sale is not guaranteed. This is at the discretion of the court and does not always succeed. It usually depends very much on the size of the debt as compared to the value of the house or land and whether there is a family living there. If there are children living there, there is less likelihood of an order for sale.

A Garnishee Order

This is an Order against a third party who holds money which is owed to or belonging to the Debtor and ordering that person to pay Creditor out of that money. Garnishee Orders are usually made against banks or building societies.

An Attachment of Earnings Order

This is an order against an Employer of the Debtor to make payments of a certain amount out of the salary of his employee and pay this direct to the Creditor.