Business Advice for a County Court Judgement (CCJ)
Every month the courts of England and Wales issues thousands of County Court Judgements (CCJ) to companies.If you receive a CCJ it is likely to make trading more difficult and can lead on to a winding up petition for your business.
Where a creditor of a company (or sole trader) is unable to collect their debt, they can apply to the court to issue a County Court Judgement (CCJ). While there is no minimum limit on the amount for which a CCJ can be applied for, it is normal to instruct a solicitor to carry out the application and therefore would be unusual for the debt to be less than GBP100. A County Court Judgement (technically a County Court Judgment [note spelling]) is an order made by the local court to force payment of the debt.
Once a county court judgement has been applied for, the debtor is notified and given the opportunity to either confirm that the debt is owed or to dispute it. Generally 14 days are allowed for this process.
If you receive notice of a county court judgement application and agree that you owe the debt, it is important that you respond with a proposal of how the debt will be repaid. It does not have to be payed at once, sensible repayment proposals (e.g. a certain amount per month) will frequently be accepted by the court. Once the judgement is made, the creditor is then legally bound to accept the plan. They cannot add further interest or collection charges and take further action as long as the terms of the judgement are met.
Ability to trade affected if you ignore the CCJ
DO NOT just ignore the CCJ application. Doing so will mean the Court will accept the debt is valid and order immediate repayment in full with no flexible payment terms.
If a CCJ is issued, the company's ability to trade will be affected. The first and most obvious effect of the judgement will be that the company's credit rating is damaged. The judgement will be advertised in the Stubbs Gazette and recorded on the company's credit file. Once this happens it will be much harder for the business to borrow from its bank in terms of a company overdraft or business loan.
Another issue that will be created by the CCJ is the impact on new business relationships. If a potential new client or supplier performs a credit check they will turn up the CCJ and this is very likely to affect the relationship even before it starts.
Possible winding up action
If you receive a County Court Judgement but cannot afford to pay the debt, you must not ignore this action. Generally if a CCJ is issued and not paid, the next form of action by the creditor will be to issue a statutory demand for the payment of the debt. After 21 days from receiving a statutory demand, the creditor can then apply for a petition to wind up the company.
For this reason, not responding to and ultimately not paying a CCJ can have very serious consequences for a business. If you find yourself in this position, it is possible that your business is insolvent and you should act swiftly to agree on and implement a business rescue plan.
