Wright, Johnston & Mackenzie Solicitors

We are focused on recovering money from your debtors as efficiently and effectively (and for as little cost) as possible. We recognise that your cash flow is one of the most important parts of making your business a success. Cash flow depends on being able to recover debts, and collect money owed to you. That is where we come in.

In this part of the site, you will find information about the following:-

- What court steps we can take

- Enforcement options

- Our costs

 

TAKING RECOVERY ACTION THROUGH THE COURTS

The procedure for collecting debts owed to you often involves court action.  We have vast experience in raising all types of court action, for recovery of all types of debt.

In Scotland, the type of court action used depends on the debt owed:-

SMALL CLAIM This is used where the debt is £0 to £2,999.
SUMMARY CAUSE This is used where the debt is £3,000 to £4,999.
ORDINARY CAUSE This is used where the debt is £5,000 and over.

Small Claims and Summary Causes

The procedures for Small Claims and Summary Cause cases are very similar, and follow a simple process:-

1. We send a Summons to the Sheriff Court.

2. The Sheriff Court fixes a Hearing Date.

3. We issue the Summons to the debtor before the Hearing Date.

4. If the debtor replies in time, he may deny liability for the debt, or in some circumstances he may be able to ask the Sheriff Court to allow ‘time-to-pay’ the debt. In both of these cases, we are able to advise you further on what your next step should be.

5. If the debtor does not reply in time, a judgement will be granted by the Sheriff Court on the Hearing Date. You will then be able to use the Enforcement Options.

Ordinary Causes

The procedure for Ordinary Cause cases is slightly different:-

1. We send a Writ to the Sheriff Court.

2. The Sheriff Court permits us to issue the Writ to the debtor.

3. We issue the Writ to the debtor, who has 21 days to decide what to do.

4. If the debtor replies in time, he may deny liability for the debt, or in some circumstances he may be able to ask the Sheriff Court to allow ‘time-to-pay’ the debt. In both of these cases, we are able to advise you further on what your next step should be.

5. If the debtor does not reply in time, Decree will be granted by the Sheriff Court without a Hearing Date being required. You will then be able to use the Enforcement Options.

In most cases, the debtor does not reply to the Summons or the Writ, or may come to an arrangement with you for payment of the debt. We are well placed to negotiate with the debtor on your behalf, to maximise the return of money to you. In exceptional cases, the debtor will deny liability for the debt, at which point our qualified lawyers take over control of the case, and advise you further on the merits or otherwise of the debtor’s denial.

We recognise that some cases are never simple, even from the outset. If you prefer, a qualified lawyer can take your case forward from start to finish, although this may cost a little more. We generally prefer to make use of our paralegal services to start cases off, because that way, we can ensure that your case moves efficiently and effectively, through the use of our sophisticated debt recovery computer system - this means less cost for you. However, our qualified lawyers can step in at any time you wish.

ENFORCEMENT OPTIONS

In cases where you have taken court action to recover the debt, additional work then has to be done to get the money in the door. Once the court has decided that you are entitled to recover the money, you may have to enforce that judgement against the debtor, if they do not voluntarily pay up.

The enforcement options open to you are constantly changing, but we can ensure you are up-to-date. At the moment, the basic options are as follows:-

1.  Lodge an arrestment at a bank Here, officers of the court serve a document which freezes the debtor’s bank account. The bank will then pay you any money in the account, up to the amount of the debt, after 14 weeks has elapsed, if the debtor has not previously authorised the bank to pay the money to you sooner.

2. Lodge an arrestment with a third party This is similar to a bank arrestment, but applies to any third party who may owe the debtor money. This is particularly useful in cases where, for example, the debtor is a contractor on a job and you are a sub-contractor, and the debtor is owed money by the main employer. You can freeze that money in the employer’s hands, which then has to be paid to you.

3. Lodge an earnings arrestment This is appropriate where the debtor is an individual who is in employment. You can get the officers of court to serve a document on his employers, who must then send a fixed percentage of the debtor’s salary to you. The percentage depends on the amount of the debt, and the size of the debtor’s pay packet, but the payments will continue until the debt is paid in full (or, of course, until the debtor loses his job).

4. Lodge an Inhibition An Inhibition is an order which prevents the debtor from selling his house or other land, without getting a discharge from you. You are entitled to insist upon payment in exchange for a discharge, so if the debtor wants to move house, or even if he wants to re-mortgage, you can be entitled to receive money out of the proceeds.

5. Execute an attachment This is an order placed against movable assets of the debtor (such as computers, desks, machines - whatever can be moved), which permits you to take those assets away from the debtor and sell them at public auction, with the free proceeds of the auction going to you to reduce the debt. Different rules apply where the debtor is an individual, and the assets are in his home, but this can still be a very effective remedy.

6. Liquidation / Bankruptcy This can be the ultimate sanction - once a debtor is in liquidation (in the case of companies) or is bankrupt (in the case of individuals), all of their assets will automatically transfer to a third party, whose role is to gather in those assets and pay out money to creditors in certain proportions. Some creditors have higher rights than others in these circumstances, and often there are not enough assets to be paid out to creditors. This is why it can sometimes be the last resort - the prospect of getting money back is fairly slim except in certain circumstances.

 

DEBT COLLECTION COSTS

We aim to ensure that, where possible, you should not be out-of-pocket as a result of having to instruct us to chase your debtor - the party who should bear those costs should be the debtor, not you.

We are able to do this because whenever you obtain a judgement against a debtor, the court will normally award an amount of expenses to you, as the “winner”. These costs can be recovered from the debtor as part of the judgement amount.

We have therefore created a costs structure which means that, in cases where we are able to obtain judgement for you without the action being defended, we will charge you less than the sum which the court awards you in expenses.

The following table outlines our costs for undefended court actions:-

Debt amount     Court expenses     Our fee
£0 - £3,000         max £300               £90.00
£3,000 - £5,000   £175.78                 £140.00  
£5,000 +            £265.30                 £175.00
   

All of our costs carry VAT at 20%.

In addition to these costs, we will also have to incur some outlays , which are paid to the court. These include the cost of raising the court action (£65 for debts of less than £3,000, £80 for debts of more than £5,000), and possibly the cost of serving the court papers on the debtor by officer of court (usually around £50 plus VAT). These outlays are all recoverable from the debtor, though, so again you should not be out-of-pocket.

There may also be some additional costs. If, for example, your debtor applies for time-to-pay the debt by instalments, we will have to attend court on your behalf. You will be entitled to recover extra expense from the debtor for that, though, and our own additional fee would be within the amount you can recover.

If the court action becomes defended, the case will be passed to one of our qualified solicitors to deal with. Here, the charging becomes more complicated (based on an hourly rate), and the qualified solicitor will provide you with a quote for this work at the relevant time if necessary. While such cases will cost you more, the amount of expenses you can recover from your debtor if you are successful will also be higher.

We can of course provide advice and assistance in relation to our costs as the case progresses, and you can ask us at any time what your cost exposure is, or is likely to be. We are committed to being transparent and open with you about our fees, because only that way can you understand and appreciate what you are getting into whenever you sue.

Our Group

• Steven Docherty (Head of service)
• Marie Rafferty
• John Grant