There are 4 constituent countries in the United Kingdom: England, Scotland, Wales, and Northern Ireland.
The procedure for filing a debt claim in Scotland and Northern Ireland is the same.
DEBT COLLECTION PROCEDURE
To collect their debt from the debtor, the creditor can resort to alternative dispute resolution methods or file a debt claim in court or initiate legal proceedings.
The cost of the mediation process is more affordable than filing a lawsuit in court. The amount of the debt is taken into account when determining the cost.
A legal demand can also be made to request payment of a debt from an individual or a company. If more than 6 years have passed since the debt's origin, a legal demand cannot be made, and only legal advice can be sought.
Therefore, attention should be paid to the 6-year period in debt collection.
HOW TO FILE A DEBT CLAIM?
In the United Kingdom, creditors who are unable to collect their debt have the right to file a debt claim against the debtor, but it is subject to certain conditions.
The legislation in Scotland, England, Wales, and Northern Ireland that is in force for debt collection may differ in some cases. Therefore, it is recommended to seek legal advice about the legislation in the region where the debt claim is planned to be filed.
For example, in Scotland, if the debt amount you want to file a debt claim for is below £5,000, the case is heard under the simple procedure. If the debt amount you want to file a debt claim for is above £5,000, you must file a lawsuit in the general court. Legal advice from a lawyer is recommended in both cases.
In general, in the United Kingdom, a debt claim can be filed in court to collect the debt, and if the case is won, the court's decision can be used for enforcement or bankruptcy proceedings.
To file a debt claim in England, you need to apply to the county court. It is possible to file a debt claim online or by post. The application fee and trial expenses can be paid online.
If the court orders the debtor to pay money, and this money is deposited into the court's account, it will be held by the court for 10 years, and the creditor must request this money from the court within 10 years.
Anyone claiming to be owed money by someone can use the debt claim process in court.
The court fee to be paid when filing a debt claim varies depending on the amount of the debt.
For example, the fee for filing a debt claim for a debt between £10,000 and £200,000 is calculated as a percentage of 5% of the debt.
When filing a claim online, the amount of the debt must be specified. If the debt amount is not specified in the application, a court fee of £10,000 must be paid.
Various assistance procedures and conditions regarding legal expenses have been regulated for individuals with poor financial status. Different rules are applied in Northern Ireland and Scotland.
Individuals who claim to be creditors but have poor financial status can apply for legal expense assistance by providing evidence of their insufficient financial status and meeting the mandatory requirements for aid. If the debtor to be sued is a company, it can be questioned whether the company has gone bankrupt or whether a decision has been made to suspend bankruptcy proceedings (temporary liquidation) before filing the claim.
In fact, it is useful to inquire about this. It is possible to demand the accrued interest when opening a debt claim.
The accruing interest can also be requested. If the accrued interest is certain, it must be calculated and specified in the claim petition. If the interest on the claimed debt has not been calculated, it is possible to request the court to calculate the interest.
This issue must be clearly stated in the claim petition. The interest applied to commercial debts in default varies depending on the amount of the debt and the contract between the parties.
In the following three cases, it is not possible to file a claim online:
1- When the amount of the claimed debt is £100,000 or more,
2- When the amount of the debt cannot be determined,
3- When the subject matter of the debt claim is £10,000 or more, and assistance is requested for the court fee.
When a claim cannot be filed online, it is possible to file a claim by mail. If you want to file a claim by mail, you can access the forms to be filled out through the websites.
It is beneficial to contact the court after filing the claim online to check whether the claim has been filed correctly. After the claim is filed, the claim petition is sent to the opposing party, and the opposing party is expected to respond to the claim. The defendant may claim that the debt has been paid, offer a plan for the payment of the debt, or reject the debt.
After the claim is filed, the parties can also apply for mediation by mutual agreement. Therefore, it is possible to use the mediation process before or after the claim is filed. The mediation application service is provided free of charge after the claim is filed. The hearing procedure to be applied in the debt claim varies according to the value of the claim.
If the subject matter of the claim is £10,000 or less, the hearing can be held in the judge's chambers or in one of the district court hearing rooms. If the subject matter of the claim is over £10,000, the hearing is conducted more formally.
After the hearing, the Court makes a decision on the case and sends a copy of the decision by mail to the parties involved. If the parties believe that the Court's decision is unlawful, they have the right to appeal within 21 days.
If the debt specified in the Court decision is not paid, the creditor has the right to apply to the Court again to request enforcement of the decision. However, additional fees must be paid for the collection process. After the fees are paid, the creditor may request that enforcement officers be sent to the debtor by the Court.
The enforcement officer sends an order within 7 days to the debtor, ordering payment of the debt. If the debt is not paid within the 7-day period, the enforcement officer may seize the debtor's assets and initiate the necessary procedures for their sale.
Legal Demand Applications:
Different forms must be filled out depending on the type of debt for legal demand applications. When a legal demand is sent to the debtor, they have 21 days to do one of the following: pay the debt, reach an agreement with the creditor to pay the debt, or send their responses and objections to the debt in writing.
If the debtor does not respond within 21 days after a legal demand has been sent, bankruptcy or closure of the company may be requested. Legal demand forms can be downloaded from the relevant website. No additional letter needs to be sent after this form has been sent.
If the debt amount is £5000 or more (the debtor may be an individual or a company), and the debtor does not respond within 21 days, bankruptcy can be requested. Or if the debt is less than £750 and there is evidence that it will not be paid, bankruptcy can still be requested.
It is necessary for the legal demand form to be served to the debtor.
When serving the form:
Generally, service is made through a lawyer. However, methods such as sending by registered mail or leaving it in a mailbox can also be used instead of personal delivery. To prove that the legal demand document has been served to the debtor, the date and time of delivery must be recorded.
If the debtor does not pay the debt within 21 days of receiving a legal demand, refuses the demand and objects, the creditor has the following options:
In both cases, the creditor must have made the application within 4 months. If the creditor misses the 4-month deadline, they can apply to the Court and explain the reason for the delay.
MEDIATION PROCEDURE
Mediation is one of the legal methods in which debts can be quickly recovered. It is less expensive than court application costs. The application and collection costs are paid according to the amount of the debt when applying for mediation.
There are separate mediation networks in Scotland and England.
Mediation can be sought before or after filing a lawsuit.
HOW TO FILE FOR BANKRUPTCY?
A person claiming to be a creditor from someone living in England should fill out a bankruptcy petition and submit it to the Court.
Even individuals or company officials can decide to declare their bankruptcy by notifying the Court that they cannot pay their debts and requesting that their bankruptcy be decided by petition.
It is important to get legal support from a lawyer during the bankruptcy process.
When starting the bankruptcy process, it must be proven that there is at least £5,000 of debt in addition to the petition. Therefore, if the amount owed is less than £5,000, bankruptcy cannot be initiated against the debtor.
It is also necessary to check whether other people have filed for bankruptcy against the debtor. It can be queried whether bankruptcy proceedings have been filed against the debtor in the last 18 months. A fee is paid for the query.
The standard application form should be filled out and submitted to the Court after checking whether bankruptcy proceedings have been filed before and, if so, adding their information. If another bankruptcy petition has already been filed and the case is still ongoing, other creditors also have the right to request bankruptcy. However, the application fee is less in this case.
However, if a bankruptcy case has been previously filed and resolved against the same debtor, another bankruptcy case cannot be filed against them. The creditor must request to be included in the "creditors' list" in this case.
There is a Court deposit fee that must be paid for the bankruptcy case to be filed, and this fee must be paid at the time of application. In addition to the deposit fee, a cost fee for Court expenses must also be paid. Bankruptcy proceedings can also be initiated online. In the case of an online application, Court expenses can be paid with a credit card.
If these fees are not paid, the bankruptcy process will not be initiated.
How can being owed 5000 pounds or more be proven?
As mentioned, a creditor who does not have a debt of 5,000 pounds or more cannot apply for bankruptcy.
When filling out the bankruptcy petition and submitting it to the Court, documents proving that there is a debt of 5,000 pounds or more must be attached to the bankruptcy application.
These documents include:
Therefore, in the United Kingdom, it is not possible to file a bankruptcy petition against a debtor with any written document.
In Scotland, if the company's debt payment status has deteriorated and the company has become unable to pay even 750 pounds of debt, the company director can file a petition to request the company's bankruptcy.
The court can make three types of decisions regarding the bankruptcy request:
It can accept the bankruptcy, postpone it, or reject it.
If the company is declared bankrupt, a legal officer is appointed to manage the bankruptcy procedure.
The bankruptcy of the company is announced in the London Gazette. The announcement details information about the company.
HOW CAN DEBT RECOVERY BE DONE FROM A BANKRUPT COMPANY OR INDIVIDUAL?
First, it is necessary to register on the list of creditors. This list consists of individuals who have a debt from the debtor and who have been registered on the list.
Being registered on the list of creditors does not guarantee that the debt will be collected.
However, creditors who are registered on the list of creditors can attend "creditors' meetings" and vote in decisions to be made.
If the individual debtor for whom bankruptcy proceedings have been initiated is a real person, their information is announced in the list of insolvent individuals.
If the debtor whose bankruptcy is being sought is a company, the company's information is announced in the list of insolvent companies.
In addition, there is a separate list of the names of the directors of the companies whose bankruptcy is sought, and information about the bankrupt can be obtained from that list as well.
After the bankruptcy decision is made, the records in these registers are removed from publication three months later. Those who believe there are errors in the records can report this to the register.
However, even after the 3-month period has ended, it is possible to obtain information about the bankruptcy process regarding individuals. In this case, the penalties imposed on the bankrupt will have been removed from publication.
The liquidator dealing with the bankruptcy case can be contacted and information about the bankruptcy process can be requested.
In Scotland, the procedure for registering creditors in bankruptcy is different.
In Scotland, the notification of a debt to a person or company that has gone bankrupt is limited to certain periods of time. When a company or individual is declared bankrupt, a liquidator is appointed. The liquidator identifies the creditors of the company or individual from their records and sends a notification, including the application form for registration in the "creditors table," to the creditors. The liquidator has 60 days to complete this process. Creditors must complete and submit the form within 120 days from the date of the notification. The creditor must also attach the documents that support their claim to the debt. These documents may include invoices, court judgments, written acknowledgments of the debt, payment receipts, and data obtained in a computer environment. If the debt includes loans to family members or friends, it must be supported by a notarized document from a lawyer.
If you cannot pay your debts on time and do not want a bankruptcy case filed against you, you can restructure your debts with the agreement of 75% of your creditors, which can prevent a bankruptcy case from being filed against you. The "Individual Voluntary Arrangement" (IVA) procedure applied in the United Kingdom prevents any of the creditors from filing a bankruptcy case against the debtor. With the approval of 75% of the creditors, the debtor can restructure their debts and sign a payment plan to prevent a bankruptcy case from being filed against them. To do this, you need to contact the insolvency practitioners and make a legal application. If you do not make payments in accordance with the agreement, the insolvency practitioner may cancel your restructuring and file for bankruptcy against you. However, you can continue your activities during this process.
DEBT RELIEF OPTION FOR THOSE WITH DEBTS UNDER £30,000
If you have debts of less than £30,000 and do not own a property to live in, you can apply for a debt relief order from the bankruptcy court officer. The other conditions are as follows:
When the debt relief order is granted, the creditors can only collect from the debtor if the court approves it. The application process can be prepared with debt counselors, and a debt payment plan can be proposed.
Generally, 12-month periods are used, during which the debtor is subject to restrictions. The debtor is obligated to immediately report any improvement in their situation.
If you have a debt to collect in England, Wales or Scotland and want to initiate bankruptcy proceedings against the debtor or collect a debt from a bankrupt individual or company, you can contact our office, obtain more detailed information, and arrange to speak with our partner law offices in the United Kingdom.