Are all debts worth recovering?

If you are a creditor wondering how to get your money back you're first reaction may be to send in the bailiffs. However, even after obtaining a Court judgement, not all debtors have the ability or willingness to pay their debts.

Some debtors may be considered judgement proof, meaning that they have no assets or income that can be legally seized by bailiffs or other enforcement methods.

In this post, we will explain what judgement proof debtors are, how to identify them, and what options you have as a creditor to recover your money.

'If I owe the bank $1 million then it's my problem, If I owe the bank $100 million, then it's the banks problem'

Jean-Paul Getty

The Definition of Judgement-Proof Debtors:

Judgement-proof debtors are individuals who can be impervious to debt recovery methods. This is often due to their limited financial resources, lack of assets or lack of desire to deal with their finances. Pursuing a judgement against such debtors may yield little to no tangible results, making the recovery process more costly than the debt itself.

Factors to consider when chasing debt:

   1.  Limited Income:

• What disposable income does the debtor have? What is their financial position. If they have little or no disposable income, what is the likelihood of payment,

   2.  Assets:

• Ten years ago, if you had a 50 inch TV in your home, you probably paid over £2000 for it. Now you could pick up a similar TV for less than £400.00.  Most cars less than 4 years old are on some form of finance, meaning they can't be taken to repay a debt. Cars over 4 years old may not have value in them when you factor in cost of judgement and enforcement. Look around your own house. What value could your household assets realize at a no-reserve auction?

   3.  Poor Credit:

• The advantage of taking out a County Court Judgement (CCJ) is that the debtor knows that if it remains unpaid, it will have a detrimental effect on future credit decisions, but what if they already have multiple CCJ's against them. Will one more make any difference?

   4.  Vulnerability:

• The UK Government recently introduced 'Breathing Space' legislation in order to protect vulnerable debtors against immediate enforcement action. Could the person who you are chasing be classed as vulnerable?

   5.   Stability

• A number of persistent debtors live a nomadic lifestyle. The average length of tenancy for private renters in the UK is just 20 months. The average time from a debt being due to enforcement stage can be over 6 months.

The Cost-Benefit Analysis for Pursuing Judgement-Proof Debtors:

    Legal Costs:

• Initiating legal proceedings against judgement-proof debtors can be an expensive process. Legal fees, court costs, and other expenses may outweigh the potential recovery. Although these fees and costs can be added to the debt, if they are not recovered then you will carry the burden.

    Time-Consuming:

• Pursuing judgement-proof debtors through legal channels can be a time-consuming endeavour. The legal process may take months further diminishing the returns. (An exception to this is Commercial Rent Arrears Recovery (CRAR) which can be acted on almost immediately)

    Diminishing Returns:

• Even if a legal judgement is obtained, it does not guarantee immediate repayment. Collecting from debtors with limited assets or income remains a challenging task.

In summary:

While the pursuit of unpaid debts is an integral aspect of business cash flow, it's crucial for to take advice from companies like UK Bailiffs to assess the feasibility of chasing debts and the debtors propensity to pay.

Recognizing when the costs outweigh the potential benefits can allow for a more strategic approach to debt recovery.

A County Court Judgement remains on file for 6 years and bailiffs acting under a warrant or writ of control have 12 months in which to take control of the debtors assets, so it may be just worth biding your time until the debtors circumstances change.

It is often very frustrating to see someone who owes you money 'getting away with it' but occasionally you could be throwing good money after bad.