The Debt Collection Process - Republic Of Ireland

Late payment and its effect on the financial viability of your business is of concern regardless of what business you are in.  It is a well known fact that the earlier a debt is processed through the legal route the easier it is to recover.

Before submitting a file for legal debt recovery creditors need to know the following information;

If the Debtor is a Company:

• The full title of the company involved.

• Is the customer a Limited Company / Sole Trader / Partnership / Individual?

• Where the company is Registered Office?

• Does it trade from any other address?

• What is the company’s Registration number?

 

If the Debtor is an Individual:

• What is his/hers full name and address?

• Do they trade under any other title?

 

Company Search

It is important that legal proceedings are entered under the correct debtor name, therefore, it is Morgan McManus policy to conduct a Company search in order to ascertain the correct title for each customer submitted.

On receipt of instructions to collect a debt Morgan McManus provide to the client a very clear and precise Instructions Sheet to ensure that the correct information is collected at the start of the process, thus ensuring more speed in the debt collection process and less chance of the Debtor escaping liabilityLiability
Liability means legal responsibly for one's acts or omissions. Failure of a person or entity to meet that responsibility leaves him open to a law suit for any resulting damages or loss which may occur to the other party. by reason of misidentification or missing critical financial information.

Terms & Conditions

It is a good policy for each business to have clearly written Terms & Conditions as this will assist you in the event that you have to issue legal proceedings for the recovery of outstanding monies. Credit terms should also be clearly set out to ensure that customers are fully aware of your company’s credit terms.

Morgan McManus have created a FREE template Credit Application Form for clients to furnish to their customers at the start of the business contract. To obtain a copy of this Form, please contact us.

 

Enforcement Of Judgments

Judgment

If a Creditor successfully obtains Judgment against the Debtor from the District Court, Circuit Court or High Court (whether in a defended or undefended case) statutory interest, currently at the rate of 8% per annum, will be applied to the Judgment amount.

Statutory interest on Commercial Debts

This can be claimed under the European Communities (Late Payment of Commercial Transactions) Regulations 2002, (SI No. 388 of 2002). In some circumstances costs of up to €100 can also be claimed.

• The rate of interest is the European Central Bank main refinancing rate plus 7 percentage points unless otherwise agreed - the base rates are set on 30 June and 31 December.

• Statutory interest does not apply when you sell to the public. Both seller and buyer must be acting in a commercial capacity.

• For contracts made since 7 August 2002, all businesses and the public sector can claim against all businesses and the public sector.

• Statutory interest can be claimed after late payment has been received. The limit is six years in Northern Ireland.

• The interest usually runs from 30 days after it was due and claimed. A contract or custom and practice may change this, but only if it gives a substantial remedy.

• A contract can't exclude statutory interest, but it is not compulsory to claim it.

Costs can also be awarded but tend to be relatively minimal if the case is not defended.  Once Judgment has been obtained, there are various options and enforcement methods which can be pursued.

 

Enforcing The Judgment

The County Sheriff

The County Sheriff is an officer of the Court who may seize goods from the Debtor in satisfaction of the debt owing. This is achieved by way of an Execution Order for Goods. These goods, once seized, will then be sold and the resulting funds will be used to discharge the debt.  Often the Sheriff will return the Order marked “Nulla Bona”, which literally means “No Goods” but essentially means that the Sheriff could not find any suitable seizable assets belonging to the Debtor or could not gain entry to the premises.

Registration of Judgments

One option open to a Creditor involves the registration of the Judgment.  Various Trade Gazettes publish these Judgments on a weekly basis and the threat of publicity is sometimes considerable encouragement for the Debtor to pay his debts, especially if the Debtor is actively trading.   However, it is important to be cautious when adopting this option as it may result in an outcome beyond that which was intended.  Registering a Judgment may have serious consequences for the Debtor. It may even result in the Debtor becoming insolvent and going out of business. If this occurs, recovering the debt may become an expensive and time consuming process with no guarantee of a successful action.  It is also extremely important to note that if Judgment is registered mistakenly or after payment of the debt has been received, the Debtor is permitted to sue for defamation and may be entitled to claim damages.  Furthermore, when Judgment has been satisfied, it is important to remove it from the register.

Enforcement of Judgments

There is no monetary jurisdictionJurisdiction
The authority given by law to a court to try cases and rule on legal matters within a particular geographic area and/or over certain types of legal cases. It is vital to determine before a lawsuit is filed which court has jurisdiction. In the specific context of Northern Ireland and the Republic of Ireland, it is important to ascertain whether the Courts in Northern Ireland or the Republic of Ireland are entitled to try the caseal limit on the District Court with regard to the enforcement of Judgments.   Therefore, any Judgments of the High Court, Circuit Court or District Court can be enforced using the Enforcement procedures available in the District Court.

Examination

This Enforcement procedure allows a Creditor to issue a “Summons for Attendance of Debtor”. Such a Summons orders a Debtor to attend before Court on a certain date to be examined as to their means. It is only appropriate for individual, rather than corporate Debtors.  The summons, duly stamped, is brought to the Court office in duplicate, together with a statutory declaration that the debt is due under a Judgment, Decree or Order of the Court and the Debtor is ordinarily resident in that court area.  A Court date is inserted on the Summons and is returned for service on the Debtor. The summons should include a Statement of Means to be completed by the Debtor.

Installment Order

If the Debtor fails to attend for examination on the return date or fails to submit a Statement of Means or, on examination, fails to prove their inability to pay, the Judge may grant an Installment Order. This might require the Debtor to pay the whole amount or a specified sum every week or month etc.  If the Judge considers that, to impose such an Order would be futile, he may adjourn the application generally. The application can be re-entered at any time if the Creditor learns of a change of circumstances in the Debtor’s financial situation.  A Creditor may wish to have an Installment Order varied in circumstances where they have learned that the Debtor’s financial circumstances have improved. This is done by way of an Order for Variation of an Installment Order.

Committal Order

If the Debtor fails to pay the sums in accordance with the terms of the Installment Order, the Creditor can apply for a Committal Order.  This means that the Debtor can be arrested and sent to prison for a maximum period of 3 months.  The Committal Order, when granted, must be lodged together with a Warrant to enforce the Order for Arrest and Imprisonment in the relevant Court office.

Garnishee Order and Receivership by way of Equitable Execution

These types of Enforcement may be effective where monies are owing to the Debtor by a third party or parties. These Orders would consist of the Court ordering that the monies owing by the third party or parties should be paid directly to the Creditor. Timing and knowledge of the Debtor’s current financial affairs are essential for this type of Enforcement and often it will not be a suitable type of Enforcement.  These Orders can be useful where the Creditor knows that the Debtor is selling his house or car, or where he is due to receive rent or some sort of payment in the future. The Court will however be very reluctant to attach such Orders to a Debtor’s salary.

Judgment Mortgages

If a Debtor owns a house, be it jointly with a spouse or otherwise, the Judgment can be registered as a Mortgage against the house. This would have the effect of prohibiting any dealings on that property until the relevant debt is discharged. The Creditor can also apply to have the property sold to obtain funds to discharge the debt. This is done by way of an application for an Order for Sale. Statutory Interest of 8% per annum continues to be incurred while the Judgment Mortgage remains in place.

Bankruptcy

If a Debtor fails to pay a debt, then a Creditor can apply to Court to have the Debtor declared bankrupt. For obvious reasons, this option, when threatened, is a serious encouragement for the Debtor to pay the debt.  This option is relatively expensive however, and can take a considerable time to complete. Furthermore, it should be noted that, though a Creditor may initiate bankruptcy proceedings, commencing the bankruptcy proceedings does not automatically entitle the creditor to recover the debts owed to them. There will nearly always be preferential creditors, such as the Revenue Commissioners, who will be entitled to receive their monies first.

Winding Up by the Court

The Court can order the winding up of a company on the petition of a person or body entitled to present such a petition. These petitions are usually made by or on behalf of the Creditors of the company.  The threat of this action is also often a considerable inducement for the Debtor to pay the monies owed and can be very effective in many cases.

Restoration of a Company

Where a company has been wound up, leaving debts owing to a Creditor, the Creditor can apply to have the Debtor company restored to the Register of Companies, to facilitate the pursuit of the company and its directors to recover the debt owing.  This is sometimes the only means by which a debt can be recovered from a company that is dissolved prior to paying off its debts. In such cases, the Revenue Commissioners may seek to recover any monies owing to them.

Legal Fees

Our fees and charges are agreed with the client in advance of any action by us.  Those fees and charges are tailored to suit our client’s needs. Our charges can include a commission element or, if the client prefers, our fees can include more of a fixed fee element.  Often the receipt of a solicitor’s letter by a debtor will often be sufficient to bring matters to a satisfactory conclusion and court action can be avoided. The letter often prompts full or partial payment or a negotiation process in which we are often active participants usually by way of negotiation over the telephone based on instructions from our client.

If the matter proceeds to the issue of court proceedings, in addition to our commission charges on monies recovered, there are also scale fees.

The scale fees are set by the Government and are calculated by reference to the amount of the debt. These are recoverable from the Debtor if the case is successful. As the scale fee and the commission tends not to be an economic return for the work undertaken for issuing and serving court proceedings , we also charge you for certain costs of the firm which are not recoverable from the Debtor. Such costs reflect the time cost undertaken and also cover outlays such as postal charges.  The scale fee and costs charges are in addition to the commission on monies recovered.

If we are obliged to attend in court or are required to proceed to a Judgment in one of the above courts, then there will be additional costs in connection with preparing for the Court Hearing or the enforcement of the Judgment and any further action. There will also be additional charges incurred if it is necessary to engage a barrister in the Circuit Court or High Court proceedings.

It should also be noted that we are obliged to charge Vat on all our fees.

Should you wish to engage us in your debt recovery cases, we will provide to you a more precise and definitive guide to the fees and costs likely to be incurred by you in relation to your particular case and this will be based, as appropriate, on a detailed review with you of the circumstances of the monies owing to you.