Debt Recovery – the Legal Process & Enforcement Options

Debt Recovery – the Legal Process & Enforcement Options – Your Questions Answered

1. Should the legal debt recovery process be pursued?

Before you start legal procedures, you must consider whether the debtor will be able to pay you. Therefore, you should gather as much information about the debtor as possible at the outset, including:

• Whether the debtor owns any property and if any, what mortgages are on already registered against it;
•  Whether the debtor has any other assets;
•  Whether the debtor have a financially viable business;
•  Whether the debtor is in current employment;
•  If the debtor is a company, what is its current status, i.e. normal, In Liquidation, strike off listed, dissolved;
•  Whether a personal guarantee has been provided.

2.  How do you initiate the debt recovery process?

The first step in any legal debt recovery action is to send the debtor a formal letter demanding payment within seven days. This letter will inform the debtor that court proceedings will be instituted if payment is not received.

3. If there is no satisfactory response to the demand for payment, what is the next step?

If payment is not received, proceedings are issued in one of three jurisdictions, which are limited in monetary terms as follows:

• The District Court for debts up to €6,348
• The Circuit Court for debts between €6,348 – €38,000
• The High Court for debts greater than €38,000

4. What is the procedure in the relevant court to obtain judgment against the debtor?

Judgment can be obtained in one of two ways, either on an uncontested basis or a contested basis as set out in the following tables:

 District Court

Uncontested Proceedings

• The Civil Summons, the document setting out your claim is served on the debtor with a hearing date before the Court.
• No response is received by the debtor and therefore there is no court hearing.
• You swear an affidavit of debt to be lodged with relevant judgment papers with the District Court office.
• The District Court office reviews the papers and issues judgment in the form of a Decree.

Contested Proceedings

• The Civil Summons, the document setting out your claim, is served on the debtor with a hearing date before the Court.
• The Debtor lodges a Notice of Intention to Defend indicating that they going to contest the claim.
• The case is heard before the judge on the hearing date when both parties set out their position.
• The Judge will decide whether to issue an order for judgment, called a decree.

Circut Court

Uncontested Proceedings

• The Civil Bill, the document setting out your claim is served on the debtor.
• No response is received by the Debtor and therefore there is no court hearing.
• You swear an affidavit of debt to be lodged with relevant judgment papers with the Circuit Court office.
• The Circuit Court reviews the papers and issues judgment in the form of a Execution Order.

Contested Proceedings

• The Civil Bill, the document setting out your claim, is served on the debtor.
• The debtor enters an Appearance indicating that they are going to contest the claim.
• The debtor may raise a Notice for Particulars, seeking further details of the claim to which Replies to Notice for Particulars must be filed.
• If the debtor does not file a defence, a motion for summary judgment is issued and the Judge will decide whether to grant judgment or allow debtor further time to enter a defence.
• The debtor files a Defence.
• Notice of Trial is served on the debtor advising of court hearing date (which can vary depending on Circuit Court concerned).
• Court hearing takes place and both parties set out their position to the judge.
• The Judge will decide whether to issue an order for judgment.

High Court

Uncontested Proceedings

• The Summary Summons, the document setting out your claim is served on the debtor.
• No response is received by the Debtor and therefore there is no court hearing.
• The Creditor swears an affidavit of debt to be lodged with relevant judgment papers with the High Court central office.
• The Central office reviews the papers and issues judgment in the form of a Fifa Order.

Contested Proceedings

• The Summary Summons, the document setting out your claim is served on the debtor.
• The debtor enters an Appearance indicating that they are going to contest the claim.
• A Motion seeking summary judgment, which must be grounded on an affidavit of the creditor setting out the nature of the claim, is issued before the Master of the High Court.
• The debtor may respond by setting out their position on affidavit also.
• The Master of the High Court hears both sides on affidavit and will do one of the following:
  • Grant Judgment to the Creditor;
  • Refer the matter to a Judge of the High court for determination;
  • If both sides consent, can send the matter to full plenary hearing with oral evidence.

5. What costs can be recovered against the debtor if judgment is successfully obtained?   

In uncontested cases, the courts will also award scale costs against the debtor, which are very low. In a contested case, it is up to the Trial Judge to decide whether to award costs. However, in civil proceedings of this type, costs normally follow if a creditor successfully obtains judgment. If the amount of costs to be paid pursuant to a Court Order cannot be agreed, a bill of costs must be drawn (which will vary based on the amount of the debt and the jurisdiction) and assessed by an official known as the Taxing Master.   

6. Can interest be claimed on the debt due?  

Interest as per the terms of the contract entered into between the parties can be claimed in the proceedings themselves. After judgment is obtained, Courts Act Interest runs at 8% per annum.  

7. What enforcement options are available?  

Should you decide to proceed to enforce the judgment, you can do so in one or more of the following ways:

(a) Publication of the judgment
This involves publishing the judgment obtained in a judgment register in the Central Office of the High Court. Judgments are often subsequently published in the relevant trade gazettes and therefore will adversely affect the debtors credit rating.      

(b) Lodgment of the judgment with the sheriff
The local County Sheriff can be instructed to enforce the judgment under the execution order obtained. The Sheriff will call to the debtor’s address and attempt to seize any goods the debtor may have, in satisfaction of the debt owed. The Sheriff can often times find it difficult to seize goods of any value. This method can however sometimes induce the debtor to agree to pay the debt in installments to the Sheriff.   

(c) Register the Judgment as a judgment mortgage
We can carry out property searches to ascertain whether the debtor has any property to which a judgment mortgage can be registered. Once registered, the judgment mortgage remains a burden on the property for a period of twelve years. If the debtor sells the property, the debtor must discharge the judgment mortgage before he will be in a position to sell.   However, the judgment mortgage, if registered, is subject to any previous charges or judgments registered against the same property.   Once registered, an application can be made to the Court seeking an Order of sale of the property in order to satisfy the debt owed. If granted, the next step is to enforce the Order for sale and this is processed through the Examiners office.    

(d) Application for an installment order against the debtor
You can also seek to enforce judgment by way of an Instalment Order. This involves serving the debtor with a summons requiring the debtor to attend Court with a view to examining his means. The debtor is required to complete a statement of means and can then be cross-examined on his means on the date of the hearing.   If the debtor fails to attend, or fails to submit a statement of means or fails to prove their inability to pay, the Judge will be obliged to make an instalment order. This could be for the whole amount or for a weekly or monthly payment depending on the circumstances.    

(e) Application for a committal order
If the debtor fails to pay the sums in accordance with the instalment order made, an application can be made to the District Court for a committal order i.e. have the debtor arrested and committed to prison.    

(f) Section 214A Notice- winding up of limited company
Where judgment has been obtained against a limited company, a Notice can be issued threatening to wind up the company. If the debt is not paid within 21 days, a petition can be presented to the court seeking to have the company wound up.   

(g) Bankruptcy proceedings
Bankruptcy proceedings can be taken against an individual to make then a bankrupt. Such proceedings must be brought in the High Court and can be a lengthy and costly process.   

(h) Garnishee Proceedings
An application can be made to Court seeking a Garnishee Order against a third party who holds money which is owed to or belongs to the debtor e.g. (a creditor of the debtor/ the debtors bank). The Order would direct the third party to pay the monies directly to you as creditor. This procedure is dependent on you having good intelligence on any monies owed to the debtor.    For further information regarding debt recovery, please contact Peter Kearney, Senior Associate at pkearney@reddycharlton.ie or at 01 6619500.  

Disclaimer

This information is for guidance purposes only. It does not constitute legal or professional advice. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. No liability is accepted by Reddy Charlton for any action taken in reliance on the information contained herein. Any and all information is subject to change.