What is a County Court Judgement?
A County Court Judgement (CCJ) is a type of court order, which can be registered against you if you fail to repay the monies you owe. You may believe that you do not owe the money as a result of a dispute and this is something that the court will be asked to adjudicate on. In Q4 2019, there were 23,418 CCJs against businesses, this being a 21% decrease compared to the previous year.
A CCJ acts as evidence of insolvency and can be used to shut down a company by its creditors.
Why would a CCJ be ordered against my business?
Courts issue CCJs to companies or individuals who owe money to a creditor.
CCJs are issued as creditors would have already tried a number of times to get paid, but when this is ineffective and the payment is still not given, this is the next step to retrieve the debt.
How is a CCJ filed and how does this affect my credit rating?
The creditor must apply to the court to issue the claim. Before the claim is received, you will be warned and sent default notice. You then have 14 days to respond to the order.
A CCJ will impact your business’s credit rating for six years, unless the debt is repaid fully within a month of the issue. This leaves if hard to secure financial arrangements and loans for the company within the six years, as well as affect your personal credit rating if your personal account is with the same bank. If you do pay within the 30 days, you will still have it recorded on file, just it will say ‘settled’.
Solutions: What can I do if I have a CCJ?
To stop a judgement being issued against the company, you must follow the requests on the order. You have 14 days to respond, fill in and return the necessary paperwork. The claim gives the company a chance to pay back the debt, request more time to pay or appeal the judgement with supporting information. If you do not respond to the order, the CCJ will be issued as a default judgement by the court and/or bailiff action can occur. This is not good and will be marked on the business’s credit report.
Unfortunately, you cannot reverse an order once it has been issued. However, there is still time for you to stop a winding up petition. i.e. pay once you receive the CCJ or else a winding up petition will be ordered (for debts over £750).
When a winding up petition has been issued and advertised the reputation of the company is damaged and all bank accounts frozen. One thing you can do to prevent this from happening, is to seek legal and/or turnaround advice.
If you have an affected credit rating from a CCJ, you have the option to be hived down or hived across to a newly formed subsidiary – in effect, this wipes the slate clean. However, this is a complex process and so s238 of the Insolvency Act 1986 must be followed. You must not breach ‘transaction at under value’.
Late payment can be a cause of cash flow problems for a business, so it is important to improve debtor collection so that customers pay you. Likewise, there are options for you to consider, when tackling debt issues. Why not try a Company Voluntary Arrangement, Administration or Liquidation? Look at options to allow you to pay back the money, perhaps in instalments, without court action.
A word of warning - do your upmost to pay back the debt. A CCJ is a serious matter. If you do not pay it, you risk being served an attachments of earnings order, a third party debt order or a charging order, if not a winding up petition.
Call us on 0800 970 0539 today and speak to an adviser who will talk you through the options you have and leave you with expert advice.
Worried about poor cashflow? Feel you have got into a bit of a mess? Covid-19?, How to pay wages on pay day? For reassuring advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539
Please note that the guide includes updates due to Covid-19 For instance there have been some changes to insolvency legislation that limits creditors actions. A new 20 day moratorium for distressed businesses has also been introduced.