DEBT RECOVERY PROCESS

Raising Court Action

In Scotland, there are three types of Sheriff Court actions for payment of money: Small Claims, Summary Cause and Ordinary Cause. In addition to these Sheriff Court actions some proceedings can also be raised in the Court of Session which is the supreme civil court in Scotland. These are normally reserved for actions involving potentially large sums of money, as the cost of raising and enforcing such actions are considerably higher.

At the raising of a the action, the creditor will serve a summons (Small Claims/Summary Cause) or Initial Writ (Ordinary Cause) upon the debtor requesting that he pay the debt or advise the court of his intention to defend. In the first instance this can be done by First Recorded Delivery. If this method is unsuccessful, service may then be made by a Sheriff Officer attending at the debtor’s home address. At this stage service need not be personal. The Sheriff Officer may competently leave the document with a resident or deposit through the letterbox if no one is in attendance.

If the debtor does not pay or successfully defend the action, the Sheriff will find in favour of the creditor and grant a decree which the creditor can then pass to a Sheriff Officer to enforce. The debtor can also at this stage apply for a Time to pay Direction, which allows the debtor to offer to repay the debt by installments or by lump sum at some future date. The decision to accept or decline lies with the Creditor.

Charge for Payment

Once a Decree has been granted, a Charge for Payment must be served by the Sheriff Officer upon the debtor. The charge acts as a formal demand for payment which requires the debtor to make full payment of the debt together with interest, Court and Sheriff Officers fees within 14 days from the date of service. The document can be served upon the debtor personally; be left with a resident within the debtor’s home or place of business of service; or be deposited through the letterbox after confirmation of residence.

If we are successful in receiving the debtor at home at the time of serving the Charge for Payment, we will endeavour to obtain full payment, failing which, obtain a full report into the debtor’s circumstances with particular focus on recovery by diligence. We will attempt to identify:

a) the debtors intention to pay;
f) the debtors employment in order that an Earnings Arrestment may be served;
g) if the debtor owns any vehicles which are free from any hire purchase agreement; (these can be attached at a dwelling place without the requirement to apply to the courts for an Extraordinary Attachment Order);
h) assess the debtor’s possessions within the dwelling place in order to determine the merits of applying for an Extraordinary Attachment Order;
i) any other relevant information.

You will recall that Charges for Payment can be left with a family member or deposited through a letterbox after confirmation of residence with a neighbour. In such circumstances if no immediate response is received from the debtor, we will attempt to contact the debtor by telephone to discuss payment or obtain relevant information.

If payment is not made within the 14 days then various diligences can be executed.

TYPES OF DILIGENCE (COURT ENFORCEMENT)

In Scotland, there are a number of ways that decrees can be enforced:

Arrestment
Earnings Arrestment
Attachment
Inhibition
Statutory Demand for Payment

Arrestment

This means that money or goods held by a third party are 'frozen'. The most common example is arrestment of funds in a bank account. The creditor may instruct a Sheriff Officer to lodge speculative arrestments as there is no requirement on the creditor to establish if there are any funds in the account or indeed if the debtor holds an account with a particular bank. Many creditors will instruct arrestments to be served at the four main banks in the hope of catching funds in an account.

To enable the creditor to obtain access to the funds, the debtor can sign a mandate authorizing the third party to hand over sufficient funds to satisfy the debt. In absence of any such instruction, the creditor can apply to the court for an Action of Furthcoming which orders the third party to hand over the funds. The costs of such an action are recoverable from the debtor

Earnings Arrestment

If a debtor is working, the money they owe can be deducted from their wages/salary directly from their employer by an earnings arrestment.

The employer deducts a sum in accordance with the statutory table of deductions contained in the Earnings Arrestment Schedule and regular payments are forwarded to the creditor until the sum due is paid. If the employer fails to make deductions, they become liable for those monies which should have been deducted.

Attachment

Attachment freezes goods owned by a debtor (e.g. car/television). Once attached the debtor cannot sell, transfer or dispose of the goods. Anything that has been 'attached' can later be sold at an auction and the money raised is then handed over to the creditor.

An extraordinary attachment must be obtained in order to attach goods held within a dwelling place. A specific application must be made to the courts for permission to execute.

No such request is required to execute an attachment in a business premises or goods located out with a dwelling place, e.g. a vehicle parked in driveway of a debtor’s home.

Inhibition

A Court of Session Diligence. The debtor is inhibited from selling his heritable property (e.g. his house) for a period of ten years unless the debt is repaid. In practice if the debtor wishes to sell his house during this period he will sign a mandate in favour of the creditor guaranteeing that his solicitor will repay the debt from the proceeds of the sale of the property.

Statutory Demand for Payment

A Statutory Demand for Payment can be served on debtors who owe £750 or above. If the total of all the debts exceeds £1500 and the debtor does not deny the debt, then the demand acts as a precursor to bringing an action of personal bankruptcy (known as sequestration in Scotland).

Gordon & Noble commit ourselves to the following;-

Obviously, we would only wish to consider bankruptcy if the debtor has sufficient assets, however, in our experience we find that the mere service of the Demand can motivate the debtor to repay the debt. This course of action is particularly effective where the debtor is self employed, has heritable property of substantial value or living in reasonably affluent circumstances.

BANKRUPTCY & DILIGENCE ETC. (SCOTLAND) ACT 2007

The Bankruptcy & Diligence etc. (Scotland) Act 2007 was given royal assent on the 15th January 2007, however, the provisions contained within are still to be enacted. The act contains legislation reforming diligence in Scotland. The principal changes include the introduction of new diligences together with the reform of existing diligences. Attachment is not affected.

Land Attachment – replaces several archaic diligences;
Residual Attachment – used to attach the property of the debtor not attachable through other diligences (e.g. intellectual property, timeshare rights, short leases);
Inhibition – to be granted in the Sheriff Courts which will simplify costs and procedure;
Money Attachment – attach real money located in a outwith a debtor’s home (eg business premises);
Arrestment – automatic release of funds to the creditor after a period of time. Removes requirement for mandate or separate action;
Disclosure of Information – creditors can obtain disclosure orders from the court allowing them access to information on debtors held by third parties which could assist in recovery of debt.

SERVICE COMMITMENT

Recovery through the courts can be expensive. Clients require Sheriff Officers to make every effort to obtain immediate payment or identify information which could lead to successful recovery, rather than simply serve and execute diligence and charge the fees to the client who must meet the initial outlay.

Gordon & Noble have innovative ideas on how recovery rates can be improved and we believe we can provide a competitive edge in our service

Commitment to Recovery

We are not simply hired to ‘process’ serve Charges for Payment and execute diligence. We are committed to focusing on the earliest possible recovery of the debt and/or the obtaining of as much relevant information on the debtor as possible in order to effectively target enforcement allowing us to maximise the potential for successful recovery whilst minimising costs

Quality Assurance

Gordon & Noble commit ourselves to the following;-

a) Instructions are executed timeously;

b) Accuracy of work completed;

c) Ensure quality reporting and accuracy of information.

TRAINING SEMINAR

Gordon & Noble are experienced in delivering training seminars on Debt Enforcement in Scotland and we would be delighted to attend at your offices and provide such a seminar to all relevant staff.

DILIGENCE FLOWCHART

See flowchart (Word doc, 44K) >>

Members of the Society of Messengers-At-Arms & Sheriff Officers

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