Debt collection in Ireland is a serious problem for many small business owners.
And a working knowledge of the enforcement procedures that are available for collection of debt in Ireland is an important asset for any small business owner.
Debt collection is a topical issue at the moment for many small businesses and entrepreneurs. Questions which crop up most often include-
How do I pursue a debt?
Why can I not issue debtor proceedings for rent owed for my house?
Can I issue debt proceedings in the District Court myself?
What should I do when I receive debt collection letters?
What is the best way to deal with debt collection agencies?
Should I use a debt collection agency when trying to collect a debt?
Check out our debt collection professional fees here including demand letters, defended and undefended cases and enforcement of Judgments work.
Judgment mortgages?
Where to bring enforcement proceedings for debt collection?
Generally where the creditor lives of carries on his business. The district court will be the venue for sums less than €6,348.
District Court proceedings (sums less than €6,348)
Where you are owed a sum of less than €6,348 and have exhausted your debt collection procedure of issuing demand letters and are clearly having no success the next step in the debt collection process is to issue and serve a Civil Summons claiming your debt on your creditor.
If you then receive no letter of intention to defend the summons then you are free to apply to the District court office, filing the correct documents, for a summary decree. This simply means that if the person who owes you the debt does not defend your claim or contest the amount, then you can get a summary decree from the district court which certifies the debt that is owed to you.
The documents you need to file in this application are-
1. An affidavit of debt sworn by yourself or by someone on your behalf ( eg company accountant, company secretary)
2. A completed decree form
If the District court is satisfied to enter judgment then you will get your signed decree from the District court and this can be sent to the Sheriff for enforcement. Your debt collection process can be helped greatly if you call to your local district court office and speak to the staff there.
They are generally very helpful and the whole process of debt collection can be greatly simplified with a bit of effort on your behalf.
Circuit Court proceedings (sums less than €38,092.14)
Again when no defence or appearance is received to your issuing of proceedings(Civil Bill) in your debt collection efforts you are free to lodge the necessary papers in the Circuit Court office to obtain judgment.
The papers to be lodged in the Circuit Court office are more extensive and you really need the help of a solicitor to do so. But because the amount of debt that the circuit court will be dealing with will be up to €38,092.14, then it will be well worth it to get a legal professional on the case.
If the debt is defended and contested then it goes to court hearing and assuming you win an award you can obtain the court order from the County Registrar.
And just like the debt collection procedure for the district court, you can get the sheriff for the area to execute the court order.
High Court (sums greater than €38,092.14)
To carry out your debt collection for sums of this magnitude you must issue a High Court Summary Summons.
Assuming that no appearance has been entered by your creditor then you can proceed to lodge the necessary papers with the Central Office of the High Court judgments section which will allow you to obtain judgment in default of appearance.
This is a technical and demanding process which will require the assistance of a solicitor.
Once judgment has been obtained it should firstly be served on the defendant. Judgments of all courts can then be registered in the Central Office of the High Court and will appear in trade gazettes such as Stubb’s Gazette.
This prospect of adverse publicity can encourage a creditor to pay you promptly.
There are various procedures then for summoning before the appropriate court the debtor for the purposes of ascertaining what property and assets the debtor owns. This is a similar procedure which occurs in relation to bankruptcy.
If and when you obtain a court order or judgment against your creditor in your debt collection process another further step is to obtain a judgment mortgage on some valuable property of the creditor.
Judgment Mortgage
It is possible to register a judgment mortgage on property of the debtor, even the family home. You can then apply to the appropriate court to force the sale of the house and get paid out of the proceeds.
However the courts are reluctant to force the sale of the family home. It is important to realise that a judgment mortgage can be registered on a family home even without the consent of the non debt owing spouse.
To obtain the judgment mortgage you need to go to the appropriate court and file various documents such as details of the name of the cause, the names and addresses of the parties, the trades or professions of the parties, the location of the lands, the amount of the debt and costs and a statement from the party who is owed the money which must be sworn.
Once the judgment mortgage is obtained then it can be registered in the Land Registry or the Registry of Deeds.
Once the judgment mortgage is registered the creditor can issue proceedings for the sale of the property and if he is successful in this application then the court makes an order for sale and this sale is supervised by the Examiner of the High Court.
For this part of your debt collection procedure you will generally need the help of a solicitor. But for anyone involved in small business it is no burden to carry to understand how the debt collection process works and your role in it.
Execution Order
The execution order occurs in the latter phase of debt collection. And this is after you have obtained a court order for the debt due to you.
In this scenario you apply to the relevant court for an execution order which, if granted, is sent to the Sheriff for execution. The sheriff then writes to the debtor and has a duty to execute the execution order within a reasonable time.
He has the power to seize all the debtors’ moveable goods and has a right of entry into premises but he must not use violence and must have reasonable grounds for believing that there are defaulter’s goods on the premises.
You will then be in a position to hand over that decree to the sheriff for the area and he must attempt to execute it on your behalf.
An execution order is valid for 12 months but often if the debtor has no goods to seize then the sheriff will return the execution order to the creditor marked ‘nulla bona’ which essentially means ‘no goods’.
However nowadays this procedure can be ineffective in practice as a lot of goods will be leased or supplied to the debtor with retention of title clauses in the contract or on a sale or return basis.
However the existence of bankruptcy proceedings, receivership or liquidation complicates things and the Official Assignee in bankruptcy, the receiver or liquidator all have priority. So whilst some debt collection procedures are relatively straightforward, some will need the assistance of a solicitor.
Attachment and Committal
This is a process where a debtor fails to abide by the terms of an instalment order (an order to pay a certain amount laid down by the court) then you can apply to the District court for an order of committal ie an order for arrest and imprisonment.
To apply for this order the you will need to lodge with the court the instalment order and a declaration of its service on the creditor.
However if the creditors failure is due to hardship or inability to pay the Judge will seldom grant a committal order.
Attachments of Debts(Garnishee)
Another feature of the debt collection procedure is a fairly uncommon procedure called a Garnishee.
This occurs where the creditor has no assets apart from debts due to him, then you can apply to have those debts paid to him instead. This can also occur in relation to balances in the creditors bank account, wages due to him and any other sums due to him.
Appointment of Receiver
Both the High court and the Circuit court have the power to appoint a receiver over a judgment debtor’s property to enforce a judgment. When the receiver takes possession it is held for the court who directs what shall be done with it. The receiver has the powers which are given to him by the court.
Bankruptcy
Another, and last resort procedure, in your debt collection may involve issuing bankruptcy proceedings.
If you are intending to issuing bankruptcy proceedings against a creditor you should bear in mind the following
You gain no priority in relation to your debt
Preferential claims will still be paid first ie employees, Revenue Commissioners etc.
Bankruptcy summons will only be granted by the High Court where all other avenues have been exhausted
The Bankruptcy Act 1988 provides 2 methods by which a debtor can make a formal arrangement with his creditors
A private arrangement under the control of the court which is very similar to an examinership process for companies.
This involves the debtor setting out the reasons why he is unable to pay his debts and requesting protection from proceedings including Bankruptcy.
When the protection order has been granted the debtor will meet with his creditors and make an offer to them.
If three fifths of the creditors in number and value accept the offer, it is deemed to be accepted
Private arrangement outside the court. This is a matter of contract between the debtor and his creditors and needs the support of all creditors.
Companies
Where you are owed money by a company and you know the company is insolvent then you can petition the High Court to wind up the company (section 213 procedure). This can be an effective debt collection procedure, although the courts do not like to see it used until all other debt collection avenues have been explored first.
To do this you serve a 21 day demand letter on the company; if the debt is not paid within this period the debtor is free to petition for the winding up. Again the petitioner’s debt ranks behind preferential creditors such as employees and the Revenue Commissioners.
Pursuing debt collection against a company
1. Obtain a judgement against the company by way of “summons for liquidated debt”, the amount of debt determines in what Court the summons is issued
2. Have the judgement executed by the sheriff or the county registrar
3. Have the judgement registered in the High Court which will result in publication in Stubb’s Gazette, potentially affecting debtor’s credit rating
4. Lodge an affidavit with the Property Registration Authority registering the judgement against the debtor’s property.
5. Obtain a Court Order that the company has wilfully defaulted on the payment of its debt.
The Courts have broad powers including the seizure of the company’s assets,the director’s personal assets and even the imprisonment of the debtor.This option can be expensive and difficult to prove, and the Courts may take the less stringent approach of for example a stay to allow the debtor pay.
Apply to the High Court, where the company is unable to pay its debts but is not in liquidation for a wide range of reliefs, including arrest, seizure of assets,imposition of personal liability and assessment for damages.
Apply to the High Court to have the company put into liquidation.
Conclusion
Debt collection procedures can range from the relatively straightforward to the more complex. You will find many useful resources though to assist you in your debt collection efforts.
And your local district court is a good starting point.If you don’t feel comfortable pursuing your own debt collection then you should check out debt collection solicitors who will pursue the matter on your behalf.
Check out our competitive debt collection fees.
