We hear a lot about CCJs, or County Court Judgments, however, many aren’t aware what a CCJ is, what to do if you are issued with one and how they can affect you.
A CCJ will be issued when a debtor has failed to pay what they owe to a creditor.
What is the legal process?
The creditor must initially send the debtor a default notice, or letter of action, giving details of the sum owed and why. This must also make clear that legal proceedings will begin if payment is not made by the debtor.
If the default notice is not paid, legal proceedings will begin by the creditor issuing a money claim in the County Court to recover the debt. If you get a judgment, this means that the court has formally decided that you owe the money. It will arrive in the post and will give the following details:
- how much you owe
- how to pay (in full or in instalments)
- the deadline for paying
- who to pay
What do I do if I receive a CCJ?
Receiving court documents can be daunting and unnerving, especially if you are unfamiliar with the legal process. It can also be aggravating to receive a claim when you think you have a strong defence.
A common human instinct is to ignore court documents which is not a good idea. Failure to deal with a claim or judgment can lead to more trouble and expense as well as being more time-consuming in the long run.
If a claim is served on you, there are several courses of action you might take:
- Pay the full amount due (NB: you will also have to pay the claimant's court costs)
- Defend the claim if you disagree with it. If this is the case, you will need to acknowledge service and serve a defence. The matter will continue to trial. If the creditor succeeds in their claim, a CCJ will be entered against you.
- Do nothing - in which case, if you do not serve a defence, the trial will go ahead without a defence and your participation, and a CCJ “in default” of your defence might be entered against you.
To instruct or not to instruct
With many CCJs issued being for low value, instructing a solicitor may seem disproportionate. Claims of £10k and less will be allocated to the Small Claims track. Claims above this amount are allocated according to the value of the claim and can involve more complex legal procedures.
It is worth remembering that you cannot recoup any legal costs you incur when defending a small claims case, other than some travelling costs.
If you intend to defend a case of over £10k, then you must seek the advice of a litigation solicitor to guide you through the complexities.
Payment of debt
If paid within the month, a CCJ can be removed from the register. However, if you fail to pay within this time, the CCJ becomes visible.
Bailiffs can be used as a threat by the person or business who you owe the money to. However, seven days’ notice of their arrival must be given. If you haven't made payment when notice of their arrival is received, it is advisable to do so immediately.
How do CCJs affect credit ratings?
When certain CCJs are given, they are recorded on the Register of Judgments, Orders and Fines, and remain on this register for six years from the date of registration - unless the CCJ is set aside or cancelled.
CCJs will only be removed from the register in one of the following situations:
- They were entered in error
- Payment was made before the court proceeding started
- Payment was made within one month of the judgment being entered.
Lenders use credit rating agencies to gauge the risks involved in giving a loan to a potential debtor, be it an individual, a company or business. The agency will assess the applicant's ability to pay back the debt. Effectively, it is a calculation of how likely the potential debtor is to default on the loan.
If the applicant’s credit rating is poor, the individual/company/business’s application for a loan or mortgage might be rejected. This can be devastating for both individuals and businesses.
Article written and contributed by Richard Boyd, Managing Partner at North Yorkshire Law
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances, and is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to North Yorkshire Law directly.
Published on 17th September 2018
(Last updated 12th October 2018)