How Do Creditors Obtain a CCJ Against Your Company?

April 2, 2024 / FAQs

Receiving a County Court Judgment (CCJ) is a real possibility for companies struggling financially. Creditors may apply for a CCJ as a means of debt recovery, often marking a pivot from diplomatic methods of debt collection to more forceful methods. As such, directors must act swiftly to ensure the situation does not spiral out of control.

But how exactly do creditors obtain a CCJ against your company?

In this article, Clarke Bell will answer this question, provide an overview of the CCJ process, and cover the responses you have at your disposal.

What is a CCJ?

A County Court Judgment is a more forceful method of debt collection available to creditors who have already made fruitless attempts at debt recovery. By applying for a CCJ, creditors take the issue to the courts, potentially resulting in a court order for repayment. This can place companies in a difficult position, as a court order for repayment cannot be easily ignored. Failing to respond to a CCJ is likely to cause creditors to escalate the issue, possibly making use of winding-up petitions and other such procedures.

Eligibility criteria for a CCJ

Applying for a CCJ is quite an easy task for creditors to complete, as the process has a relatively small set of eligibility conditions. Namely, creditors must have made previous attempts at recovering the debt. This includes a letter sent directly to the debtor requesting repayment, or a formal letter of claim. If the debt continues to go unpaid, and creditors believe their debtor cannot make repayments, they may pursue a CCJ. In addition to this primary requirement, creditors must be capable of paying the associated legal fees, and also know the precise sum they intend to claim, which in turn must be below £100,000. Debts in excess of this figure must be pursued using other means.

Also Read: Our Complete Directors Guide To County Court Judgements

How can creditors apply for a CCJ?

Creditors who meet the above eligibility criteria can submit an application for a CCJ using an N1 form. This form requires claimants to include a small set of data, including their name and address, their debtor’s name and address, the value of the debt, and the particulars of the claim. Once completed, creditors may send their N1 form and an attached payment of court fees to the Civil National Business Centre.

If your creditors have made a successful application for a CCJ, you will receive a notice in the post. This notice will include the essentials of your case, including the claimant’s details, date of issue, amounts payable, and various other details. Upon receiving this notice, it is important to act quickly to maximise the chances of a favourable outcome.

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How long can a CCJ be in effect?

County Court Judgments essentially have two timeframes, both starting from the date of issue included in the notice sent to debtors. Upon receiving a CCJ, directors have thirty days to repay the specified debt fully. In doing so, the CCJ will not be registered against their company, ensuring members of the public, future creditors, and potential business partners cannot find any details regarding the CCJ order. This saves companies and directors from reputational damage, which could potentially scupper future deals and cause future parties to shy away from working with them.

If a full repayment within thirty days is not possible, directors can use the second six-year timeframe to make repayments or reach an agreement with the claimant. However, doing so has a series of implications. By failing to repay the debt when ordered, a creditor can use this as evidence that your company is insolvent, or otherwise facing serious financial difficulty. In turn, this can be used as justification to take other courses of action, such as the sending of bailiffs with a warrant or compulsory liquidation. Furthermore, evidence of the CCJ will be recorded and made available for public viewing. This allows future creditors, stock suppliers, and so on to view the specifics of your company’s CCJ, and may influence how they work with your company, if they choose to at all.

Once the six-year timeframe has expired, the CCJ will no longer be in effect. While this means immediate repayments are no longer required, creditors may still pursue the debt if they choose. To do so, they will need to submit another application to the courts, and cannot make any forceful attempts at debt recovery before obtaining court approval.

Also Read: Can a CCJ Be Removed From a Limited Company?

Can I contest a CCJ?

It is possible to contest a CCJ in some cases. If you think your CCJ has been filed in error, then you may be able to appeal to the courts to have it set aside. An erroneous CCJ filing can include incorrect information on the application or creditors failing to follow the proper procedure. If your creditor owes you money, such as in the case of equipment rentals, you may also use this evidence to have the CCJ set aside. Having a CCJ set aside allows you to gain much-needed breathing room to evaluate your situation.

Failing to act after a CCJ is not the best of ideas, as creditors can simply make another application after having rectified any errors you pointed out.

Responding to a CCJ

If you have been served a valid CCJ, acting quickly is paramount. You have several options at your disposal, including the following:

  • Full repayment of the specified amount.
  • Enter a repayment agreement with your creditor.
  • Use alternative methods of finance to repay the specified loan. This can include invoice financing, for example.
  • Appoint an insolvency practitioner to help identify and implement a solution, such as a business rescue plan or Creditors’ Voluntary Liquidation.

Creditors’ Voluntary Liquidation

If your company has received a valid CCJ that it cannot repay, enlisting the services of a licensed insolvency practitioner (such as Clarke Bell) can help you find the best solution. For insolvent companies, this solution is commonly a Creditors’ Voluntary Liquidation (CVL).

A CVL is a voluntary liquidation procedure, one that acts as an efficient method of closing an insolvent company and handling its debts. An insolvency practitioner of the directors’ choosing can be appointed to the role of liquidator, who will then take charge of the company. In this position, the liquidator will identify any company assets, dispose of them for the highest possible price, and distribute any proceeds amongst outstanding creditors. Once all possible distributions have been made, the company will be wound up and removed from the Companies House register. At this stage, any remaining debts will be written off, and a CCJ can no longer be enforced.

For more information regarding CVLs and their benefits, read our complete guide to the procedure.

Let Clarke Bell help

If your company cannot pay back its debts – including any CCJs – and you think the best option might be a Creditors’ Voluntary Liquidation (CVL), give us a call.

Clarke Bell have more than 29 years of experience in helping companies to deal with their debt problems with the liquidation process.

We can do the same for you.

Contact us today for your free, no-obligation consultation.