What can I do?
The court can issue a county court judgement to an individual or company that owes money to a creditor. If you receive a court claim, you will have 14 days to respond by filling in and returning the necessary paperwork.
The creditor will probably have tried a number of times already to get paid and a CCJ is the next step to retrieve the debt. They need to apply to the court to issue the claim.
Over 2016, there were 78,739 county court judgements against businesses. It is a common way to recover debt so it is important for companies to understand the impact of a judgement and ways to prevent further legal action.
How can I stop a judgement being issued against the company?
If you receive a court claim, you will have 14 days to respond by filling in and returning the necessary paperwork. The claim gives the company a chance to pay the debt back, request more time to pay (14 day extension) or appeal the judgement and provide information to support this.
If you don’t respond, the CCJ will be issued as a default judgement by the court and it will be marked on the business’s credit report.
As it has already been issued, there is no way to reverse it – however there may still be time to stop a winding up petition.
Failing to pay after the county court judgement could lead to the creditor issuing a winding up petition (if debt is more than £750). A CCJ is evidence of insolvency and can be used to shut down the company by the creditor(s).
Once a winding up petition is issued and advertised, it is too late to rescue the business as bank accounts will be frozen and the business’s reputation will be damaged. You must act quickly to prevent this from happening by seeking legal or turnaround advice.
If the company can’t afford to pay the debt, then it is insolvent and directors have a duty to act in the best interests of creditors.
Call us on 08009700539 and speak to an adviser who will talk you though the options.
How does this affect my credit rating?
A CCJ will impact your business’s credit rating for six years (unless the debt is repaid in full within a month of the CCJ). Any financial arrangements or loans during the six years may be difficult to secure for the business so bear this in mind. If a personal account is with the same bank, the rating could also be affected.
It may be possible for the company to be hived down or hived across to a newly formed subsidiary which will effectively wipe the slate clean, including the credit rating. This is fairly complex process and must be followed carefully to avoid breaching ‘transaction under value’ – s238 of the Insolvency Act 1986.
My company is owed money and now we’re in debt – how can I stop the threat of a CCJ?
Late payment can be cause serious cash flow problems for businesses so it’s important to improve debtor collection to get customers to pay you. Take a look at our debt collection guide.
Tackle debt issues head on and consider ways to turn around the business. Liquidation isn’t the only option if your company is insolvent.
The company voluntary arrangement (CVA) is a debt restructuring procedure which allows a viable company to repay debt to its creditors over three to five years.
Alternatively, administration can protect the company against aggressive creditors. The appointed administrators will take control of the company while all options are considered (which could include a sale of the business or an exit into a CVA).
Feel free to call us on 08009700539.