Tips for dealing with a County Court Judgement (CCJ)

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.

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.

If a creditor of a company or sole trading business is unable to collect the money that it is owed, it can apply to the court to issue a County Court Judgement (CCJ). A CCJ is an order made by the local court to force the payment of the debt.

There is no lower limit to the amount of debt for which a county court judgement can be applied for. However, a creditor will generally employ a solicitor to carry out the application process on their behalf and therefore it would be unusual to apply for a CCJ for a debt of less than GBP100.

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 are in receipt 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. The court will normally accept the proposal of a sensible repayment plan (for example a certain amount per month). 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.

A problem with borrowing is not the only issue that a CCJ creates. It is conceivable that if you are looking to start a relationship which a new client, they will want to carry out a credit check on your business. If you have a county court judgement, it is possible that this will affect their decision making as to whether trade with you or not.

Possible winding up action

If you receive a County Court Judgement but cannot afford to pay the debt, it is important that you do not ignore it. 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.

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If you have a CCJ act now and talk to us about the best solution for your situation Dealing with a CCJ

Derek's experience of both corporate insolvency and business management puts him in a position to be able to understand the challenges facing businesses in today's economic environment.

Derek Cooper is Managing Director of Cooper Matthews Limited and a member of the Turnaround Management Association UK.

Cooper Matthews specialise in Business Recovery Services Advice providing practical insolvency advice for businesses with financial problems and to Directors with Personal Financial troubles. They have significant experience in working with small to medium sized businesses.