Debt Recovery Glossary

An insolvency procedure in which an Administrator is appointed to attempt to rescue an insolvent company. It's designed to protect the company from creditors while a restructuring plan is agreed.
Attachment of earnings
If the debtor is an individual in permanent employment, the Court can make an Order directed at the debtor's employer, requiring them to make periodic deductions from the debtor's earnings to pay into Court, so a proportion of their earnings can be made available to creditors.
An individual enters into Bankruptcy when they cannot pay their debts. The court makes an Order putting their assets under the control of an Official Receiver.
Anyone can be made bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships themselves.
Bankruptcy can only apply to individuals (including sole traders and individual members of a partnership). Bankruptcy petitions may be presented to the court by the individual, by creditors who are owed £750 or more, or by the supervisor of an individual voluntary arrangement (if the individual has not complied with the terms of the arrangement). A bankruptcy order is made by the court.
The Official Receiver normally acts as receiver and manager of the bankrupt's estate and will become trustee unless an Insolvency Practitioner is appointed. The trustee realises any assets (except for certain assets, including basic domestic items needed by the bankrupt and his or her family, and items such as vehicles, equipment, tools and books needed for the bankrupt's job). After paying fees and the costs of the proceedings, the trustee distributes the remaining money to the creditors in a strict order of priority.
Charging order
If the debtor owns land or buildings then the Court can impose a charge on the debtor's property to secure payment of the sum that is due. The charging order is registered at HM Land Registry, and whilst this itself does not enforce payment, the charge does in many cases persuade the debtor to acknowledge the debt and commence repayments. The charge should secure that the debt is eventually repaid when the property is sold (providing there is sufficient equity after any prior charges have been paid), or if/when the debtor attempts to remortgage the property or obtain a loan secured on the property.
Company Voluntary Arrangement
The Company Voluntary Arrangement (CVA) is a deal between the company and its creditors (unsecured, trade and tax) to repay them from future profits (or a deal may be written to sell assets and pay back creditors from the proceeds).
The deal is based on preserving the company, rebuilding sales and profits and paying something back over a period of time to be agreed. Directors remain in control, personal guarantees don't get called in (usually) and it gives the business a fighting chance to survive. A proposal is drawn up by the directors, or if in liquidation/administration, by the liquidator/administrator.
The proposal is binding on all creditors who had notice and entitled to vote at the meeting, if accepted by excess of 75% in value of creditors present and voting. A supervisor is appointed at the meeting of creditors to administer the arrangement. His duties/powers will be set out in the voluntary arrangement
Creditors meeting
A meeting is called to examine the position of a debtor company in relation to its debts and which usually results in the appointment of a Liquidator.
A first meeting of creditors is held so that the creditors can appoint an Insolvency Practitioner (IP) as trustee or liquidator in place of the Official Receiver (OR). This is likely to be the only meeting of creditors before the final meeting is called. If the OR does not believe the assets available are enough to attract an IP, the OR will send notice to all creditors that no first meeting is to be held and as a result the OR will remain trustee/liquidator.
The OR must hold a first meeting if it is requested by one quarter in value of the creditors. If the creditors request a meeting, they will have to lodge a deposit for the costs of the meeting with the OR. If the creditors do not choose an IP at the meeting, the OR can apply to the Secretary of State to make an appointment or remain as trustee/liquidator. The OR can also apply to the Secretary of State when an appointment of an IP is needed in an emergency, for example to deal with urgent transactions involving assets. When this happens the IP must notify the creditors. This may be done by advertisement in a newspaper if the court allows, for example where there is a large number of creditors.
Further meetings of creditors (called general meetings) are sometimes held if the trustee/liquidator wants to find out the creditors' wishes in any matter relating to the insolvency proceedings, or if requested by 10% in value of the creditors.
Creditors Voluntary Liquidation
This is the most widely used type of liquidation; instigated by the insolvent company.The directors call meetings of the members and creditors to appoint a liquidator.
At the Members Meeting the members appoint a liquidator.
At the Creditors meeting the creditors either confirm the nomination of the members or appoint another liquidator.
The role of the liquidator is to realise the assets of the company.
A creditor who has threatened Court proceedings, commenced Court proceedings and obtained an award against a debtor in those Court proceedings, may still find that the debtor is reluctant to pay the sum of money that the debtor has been ordered to pay the creditor.
Awards that are made by the Courts are not enforced automatically. However, the Courts have developed a number of processes, which are designed to help unpaid creditors enforce awards.
Individual Voluntary Arrangement
An Individual Voluntary Arrangement (IVA) is a formal agreement between a debtor and his or her creditors. An IVA proposal sets out how the debtor is going to repay the creditors, usually over a period of five years.
Due to its formal nature, an IVA has to be set up by a licensed Insolvency Practitioner.
The Insolvency Practitioner will then contact all creditors to advise them that proposals for an IVA are being prepared and ask them to confirm the amounts they are owed by the debtor.
A set of proposals will then be drawn up. These will include details of income and expenditure, creditor details, a short history of how the debts built up and a proposal for repayment (including the monthly repayment amount and the duration of the arrangement).
In some circumstances the proposals will be sent to the debtor's local County Court for approval with a request for an Interim Order. The Interim Order will protect the debtor from any further court action, including bankruptcy proceedings.
Creditors will then be sent a copy of the proposals, schedules and all the other details along with the date, time and location of the Creditors Meeting. A representative will chair the Creditors Meeting. The debtor will be expected to attend the meeting so that any points that arise may be clarified without further delay. For an IVA to be approved 75% (in value) of those who vote must agree. Once approved the IVA is legally binding on all creditors, even those who have not voted.
Insolvency is the general term used to indicate that a person or business/organisation is unable to pay their debts as they fall due. There are several forms of insolvency procedures, including:

  • Statutory Demand
  • Bankruptcy
  • Winding Up
  • Official Receiver
  • Administration
  • Company Voluntary Arrangement or Individual Voluntary Arrangement
  • Creditors Voluntary Liquidation
  • Creditors meeting
  • Receivership
  • Liquidation
A creditor commences Court proceedings by issuing a Claim Form. The Claim Form is served on the debtor by the Court, together with a Response Pack. If the debtor ("the defendant") fails to respond to the Claim Form in one of the ways detailed in the Response Pack, then the creditor ("the claimant") can obtain Judgment against the debtor.
The Judgment itself does not produce any money. It is simply a Court Order that requires the defendant to make a payment to the claimant. Having obtained a Judgment against a debtor, the creditor's debt recovery agent will then advise the creditor about how the Judgment should be enforced.
The Court may also give the claimant Summary Judgment against the defendant on all or part of a claim where the defendant has submitted a defence to the claimant's claim, but the defendant has no real prospect of successfully defending the claim or issue and there is no other reason why the claim or issue should be disposed of at trial.
For example, where the defendant submits a defence which says that the claimant's invoices have been paid, where the claimant can show that the defendant's cheque has been stopped it would be appropriate for the claimant to make an application to the Court for Summary Judgment against the defendant.
In order to apply for Summary Judgment the claimant's debt recovery agent completes an application form and written evidence in support. The application and the evidence are filed at Court and a fee is paid. The defendant will have an opportunity to file his own evidence and a Court hearing will then take place before a Court official who will decide whether or not the claimant should be awarded Summary Judgment. This short procedure, which is likely to be completed within 8 to 12 weeks, will replace the usual Court procedure for dealing with defended matters which could take 6 to 12 months to conclude and which would cost the claimant and the defendant significantly more.
Useful notes regarding the procedure to be followed if the Defendant disputes the debt following the issue of a claim form can be found on Her Majesty's Courts Service web-site at
When the claimant is awarded Judgment against the defendant, the Court will normally order that the defendant pays the debt, interest and costs, including any Court fees the claimant has paid.
If a Judgment has been obtained in the County Court and the debtor does not satisfy the Judgment within 30 days, then details of the Judgment will remain on the Register of County Court Judgments. Then, if in the future a potential supplier obtains a credit reference relating to the debtor, the potential supplier will see that the debtor has had a Judgment (a CCJ) registered against the debtor and may therefore decide that the debtor is a bad credit risk and choose not to trade with the debtor. A debtor therefore has an incentive to promptly pay any sum he is ordered to pay. If he does not, then he may find that it becomes difficult to obtain credit.
Late Payment Interest
The Late Payment of Commercial Debts (Interest) Act 1998 ("the Act") was introduced on 1 November 1998 to give businesses a statutory right to claim interest from certain slow payers.
The Act applies to contracts for the supply of goods or services where the purchaser and the supplier are each acting in the course of a business. Certain types of contract, for example mortgages, are excluded from the application of the Act.
The Act was amended and supplemented by the Late Payment of Commercial Debts Regulations 2002 which implemented European Directive 2000/35/EC.
The rights established by the legislation were introduced in stages. Originally the 1998 Act was to introduce rights in 3 phases that were to come into effect on 1st November 1998, 2000 & 2002, however the 2002 regulations amended the third phase, which was introduced on 7 August 2002.
Phase 1
  • from 1 November 1998 small businesses have a statutory right to claim late payment interest from large businesses and the public sector on debts incurred under contracts agreed after 1 November 1998;
Phase 2
  • from 1 November 2000 small businesses have a statutory right to claim late payment interest from other small businesses on debts incurred under contracts agreed after 1 November 2000; and
Phase 3
  • from 7 August 2002 all businesses and the public sector have a statutory right to claim late payment interest from all businesses and the public sector on debts incurred under contracts agreed after 7 August 2002.
  • In addition to interest, a further sum in respect of "reasonable debt recovery costs" can also be claimed. The amount of "reasonable debt recovery costs" that can be claimed following implementation of phase 3, is determined by reference to a simple table:

  • Unpaid Debt Amount Allowed
    Less than £1,000.00 £40.00
    £1,000.00 - £9,999.99 £70.00
    £10,000.00 or more £100.00
A "public sector" body includes any government department, local or public authority.
A "business" may be a limited company, partnership or sole trader. The Act does not apply to consumers contracting as such.
A "large business" is a business with more than 50 employees.
A "small business" is a business with 50 or fewer employees.
An "employee" is a person who works in a business whether under a contract of employment or not (including sole traders and partners). Provision is made for counting part-time employees (employees who work for less than 35 hours per week) as fractions of full-time employees (employees who work for 35 hours or more per week) and also for employees of associated businesses to be counted. For the purposes of the Act, the number of employees employed in a business is the average number of employees employed in the business in the period of 1 April to 31 March immediately preceding the making of the contract (or employed in a shorter period, details of which appear in the first commencement order, for new businesses).
The vast majority of small businesses in England and Wales employ far fewer than 50 employees and for these businesses it will be relatively easy to decide whether or not late payment interest can be claimed under the Act. For other small businesses employing around 50 employees, it will be necessary to consider the detailed legislation and in particular the Late Payment of Commercial Debts (Interest) Act 1998 (Commencement) No. 1 Order 1998 to determine whether or not the Act can be used.
The question of whether or not the Act applies to a contract is determined by reference to the circumstances when the contract was made, and accordingly is not affected by any subsequent change in those circumstances.
A claim for interest under the Act can be made when a payment is late, either because:
  • it is not made within a credit period agreed between the supplier and the purchaser; or
  • where no credit period has been agreed, it is not made within 30 days after the later of:
    • the delivery of the goods or the performance of the service by the supplier; and
    • the day on which the purchaser had notice of the amount of the debt.
Interest starts to run on the day after the day on which payment should have been made in respect of the debt, at the prevailing rate. The current prevailing rate is 8% over the official dealing rate of the Bank of England (more commonly known as the Base Rate).
The interest can be pursued separately from the principal debt and assignment of the interest to third parties, such as factoring companies, is possible.
No minimum level has been set below which a claim for interest cannot be made.
If by reason of any conduct of the supplier, the interests of justice require that interest should be remitted in whole or part in respect of a period for which it would otherwise run in relation to a debt then a Court can order that the supplier should receive no interest for that period.
The right to claim interest under the Act does not apply retrospectively of the 3 implementation dates. Therefore, a supplier claiming interest under the Act in respect of a period prior to the implementation of the third phase on 7 August 2002 may be required by a debtor to prove that the supplier is a small business. Establishing that a supplier is a small business is likely to be relatively straightforward. Most suppliers will have personnel records readily available.
A false claim by a supplier to be a small business may have serious consequences.The Government wants to encourage businesses to agree their own contractual terms giving a right to interest if bills are paid late. The legislation therefore gives precedence to contractually agreed provisions. It would therefore be prudent for all businesses to consider and possibly revise their standard terms and conditions, as the right to claim interest under the Act may be more advantageous than those included in their standard terms.
The Act applies to contracts made under the law of England and Wales. It also applies to Scotland and Northern Ireland. Although the Scottish Parliament has the power to amend or replace the Act, it is likely that this will only be done in co-ordination with changes to the Act in England and Wales.
Letter Before Action
When you instruct a debt recovery specialist to collect a debt, the debt recovery specialist will write to your debtor and tell the debtor that unless the debt is paid within a stated number of days, Court proceedings will be commenced.
The letter will identify the creditor and the debtor and explain how much the debtor owes, usually by identifying invoices or a contract.
It will give a date by which the amount due must be paid, it may say when this amount should have been paid and it will provide a simple and obvious method for transmitting payment; for example, by cheque, postal order or direct debit. It will also indicate whether this sum should be paid to the solicitor or to the creditor and will provide a telephone number and an address to which queries or reasons for non-payment can be directed.
The letter will explain that if the payment demanded is not made within the stated number of days, then Court proceedings will be commenced by the creditor against the debtor and that if Court proceedings are commenced, then in addition to seeking payment of the original debt, the debtor will also seek payment of costs and interest.
Many of your debtors will have previous experience of debt recovery procedures. They will know that when a creditor has exhausted the creditor's internal procedures and has referred a debt to a debt recovery specialist for collection, the first thing the debt recovery specialist will do is to send a letter demanding payment. If the debtor can avoid paying the amount owed until that time, then the debtor will have succeeded in obtaining an inexpensive line of credit until then. For this reason, it comes as no surprise to us, that we collect approximately one-half of all of the debts we are asked to collect by simply sending a letter before action.
If the debtor fails to respond to the letter before action, then the next stage in the debt recovery process is to commence Court proceedings.
If Court proceedings are commenced then the cost of those Court proceedings may be recovered from the debtor, if the debtor pays the debt in full, but otherwise will have to be paid by the creditor. If the debtor is not given sufficient notice of the creditor's intention to commence Court proceedings, then the costs of the Court proceedings may be irrecoverable. The letter before action ensures that the debtor is given sufficient notice of the Court proceedings.If the debtor has a valid reason for not paying the debt, then it is better to find this out as early as possible when minimal costs have been incurred, rather than later in the process when costs are higher. The letter before action may flush out a dispute, or at least establish a dialogue with a debtor.
If a dialogue can be established with a debtor. Then this may enable the debt recovery specialist, through negotiation, to agree with the debtor that the debtor will pay the debt by instalments and may also allow the creditor's debt recovery specialist to find out more information about the debtor's assets and liabilities and therefore help the debt recovery specialist determine which enforcement method may be used to enforce any judgment the creditor obtains against the debtor.
Compulsory liquidation is the term used when a winding up order against a company or a partnership has been granted by the court.
A winding up petition will normally have been presented to the court by a creditor stating that he or she is owed a swill hum of money by the company and that the company cannot pay.
The Official Receiver becomes liquidator but an Insolvency Practitioner will be appointed to take over from the Official Receiver if the company has significant assets.
The liquidator's role is to realise the company's assets, pay all the fees and charges arising from the liquidation, and pay the creditors as far as funds allow in a strict order of priority.
Official receiver
Official Receivers are civil servants in The Insolvency Service and officers of the court to which they are attached. As well as administering cases, Official Receivers have a duty to investigate the affairs of individuals in bankruptcy and companies in compulsory liquidation.
They report evidence of criminal offences to a prosecuting agency. They report unfit conduct to the Secretary of State, who will decide whether to begin court proceedings to disqualify a director
Order for debtor to attend court for questioning
It is possible that the creditor who has the benefit of an award lacks information about the debtor.
If that is the case, then the creditor can obtain a Court Order which requires the debtor to attend Court and to answer questions about the debtor's assets, liabilities, income and expenditure. This procedure, known as an "application for order that debtor attend Court for questioning", will enable the creditor to make an informed decision about which of the various methods of enforcement he should use. Quite often, the prospect of having to attend Court in order to answer questions will cause the debtor to pay the amount due or at least to enter into negotiations.
If the debtor is a business, then it is likely that the debtor will own assets that are used in that business. If your debtor is a person, then he or she may own personal property, such as a car.
Pre Action Protocol (PAP)
The PAP which came into force on 1st October 2017, sets out the steps and conduct the Court expect of parties to take before the commencement of Court action against a private individual or sole trader. It's objectives are to ensure that the parties understand each others position as well as encourage any issues to be resolved and consider using an Alternative Dispute Resolution procedure (ADR) without the need for Court action, which ultimately could lead to reduced costs in resolving disputes. The protocol requires that a Letter Before Claim (LBC) is sent on any case where Court action is being considered.
The LBC will effectively replace the current Letter before action (LBA), and gives the customer 30 days to respond to the letter prior to which Court action cannot be commenced.
The letter sets out the type of contract, ie written/verbal, the nature of the contract, how the sums claimed have been calculated and whether the balance includes any interest and surcharges.
The new Standard Financial Statement (SFS) will also be sent with the new LBC along with an Information and reply sheet.
When a company borrows money, the lender is usually given some security over the company's assets to guarantee payment.
If the company fails to keep the terms of the loan or encounters financial difficulties, the lender may be entitled to appoint an administrative receiver. An administrative receiver is an insolvency practitioner who has control of the whole, or a substantial part, of the company's property and wide powers over the business.
The administrative receiver is mainly concerned with getting back the money owed to the secured creditor. The administrative receiver may sell the assets piecemeal, or sell the whole business as a going concern to pay off the secured creditor, and the costs of the receivership.
Retention of Title
A seller's conditions of sale will normally include a retention of title ("ROT") clause (provided that the seller's product is capable of being recovered). A ROT clause states that, "the goods supplied remain the seller's property until paid for", or something similar.
A seller may either retain title to specific goods listed in a particular invoice until those specific goods are paid for (such a clause is known as a "simple" clause) or to all goods supplied until all goods supplied have been paid for (such a clause is known as an "all monies" clause).
The general rule, set out in Section 17 of The Sale of Goods Act 1979, is that ownership of goods passes from a seller to a buyer when the seller and the buyer intend it to pass. Because parties are able to prevent title in goods passing from a seller to a buyer until those goods have been paid for, the seller becomes able to recover those goods (or the invoiced value of those goods) from the buyer if the buyer becomes insolvent.
An insolvency practitioner only has the power to deal with the assets that are the property of the company over which he has been appointed. If a seller has effectively retained title to goods, then the insolvency practitioner will have no right to retain possession of those goods, because they have not become the company's property. In order to successfully enforce a retention of title clause a seller must ensure:

  • that the ROT clause is properly drafted;
  • that it forms part of the contract between the seller and the buyer; and
  • the goods that are the subject matter of the claim are identifiable.
A typical ROT clause will

  • reserve ownership of goods supplied until those goods are paid for;
  • prevent dealings with goods other than in the ordinary course of the buyer's business;
  • give the seller a right to repossess the seller's goods; and
  • require the buyer to store the goods separately from other similar goods.
Even though retention of title clauses are now very common many claims still fail, often because the retention of title clause never became a term of the contract in the first place. The question of incorporation of the clause is very often the major issue.
Undoubtedly, the best way of ensuring that a seller's terms of trading are duly incorporated is for the seller to enter into an express agreement with the buyer that all contracts to be entered into between them will governed by the seller's terms. Ideally, that agreement should be recorded in writing, either by both parties signing a written contract, by an exchange of letters or by the seller obtaining a written acknowledgment from the buyer that the seller's conditions are to apply to dealings. That acknowledgment might be contained in an application for credit.
On many occasions, a buyer merely places a written order for goods with a seller and the seller communicates the seller's terms and conditions to the buyer either by issuing an order acknowledgment or by reproducing the seller's terms on a delivery note or on an invoice.
The terms which appear on orders, order acknowledgments, delivery notes and invoices are rarely read, discussed or considered and yet where there is no express agreement between the parties, these documents have to be considered to determine the parties' intentions.
The guiding principle is that any party who intends to impose his terms on another party must have given that other party sufficient notice of those terms before or at the time when the contract is made. Unilateral attempts to introduce further terms after that time will be ineffective.
The normal way in which a party gives the necessary notice is by printing that party's standard terms in a contractual document.
The buyer's terms may appear on the buyer's purchase order and the seller's terms may appear on the seller's order acknowledgment.
Therefore, if a buyer places a written order for goods, and that order is expressed to be subject to the buyer's terms of purchase, and the seller supplies the goods without any further contractual documentation passing, then the buyer's terms govern the contract.
If before supplying the goods the seller sends the buyer an order acknowledgment and the buyer sends no further contractual documents, then the seller's terms govern the contract. So far, so good. Things become a bit more complicated where a seller's terms of sale only appear on post contractual documents, such as delivery notes and invoices.
Delivery notes and invoices only come into existence after a contract has been made. At the time when delivery notes and invoices are produced, the contract must have been concluded, because delivery is not part of the negotiation process. Delivery is part of the performance of the contract. Similarly invoices are prepared after the contract has been performed.
Where the contractual documentation consists of a written order subject to a buyer's terms, a delivery note subject to the seller's terms and an invoice subject to the seller's terms, the buyer's terms and conditions will prevail. The position is less straightforward where a number of transactions have occurred between the buyer and the seller.
If the seller has terms printed on delivery notes and/or invoices and the buyer's orders are silent as to whose terms apply, then after several transactions the seller's terms will be deemed to govern any subsequent transaction, the buyer having received sufficient notice of the terms on which the seller is prepared to do business.
To make a successful claim the seller must be able to identify his goods in the buyer's possession.
If the buyer has disposed of the goods the claim will normally fail. The seller's identification exercise will be simpler if the seller has an "all monies" clause, rather than a "simple" clause. The seller who has an all monies clause needs to demonstrate that he has unpaid invoices and can identify goods he has supplied. The seller with a simple clause needs to show, in addition, that the goods he has identified are the goods to which the unpaid invoices relate (unless the buyer is under a contractual obligation to keep goods belonging to the buyer separate from the seller's goods).
If the buyer has incorporated the goods into a new product as part of a manufacturing process the claim will fail provided that the goods cannot be removed from the new product with minimal effort and without damaging the new product. If the seller's goods have been mixed with other identical goods (either supplied by the seller and paid for or supplied by others) then the claim should succeed, although it will be necessary to determine who owns what element of the combined stock.
Making a claim
To make a claim a seller should write to the Insolvency Practitioner terminating the insolvent company's authority to deal with goods and requiring payment for the goods or immediate "delivery up" of those goods.
As early as possible after a seller is put on notice that an Insolvency Practitioner has been appointed, steps should be taken to establish exactly what goods are at the premises of the insolvent company. A representative of the seller should go to the premises of the company as early as possible. Ideally, the seller's representative will attend on the day on which the seller learns of the buyer's insolvency.
If the seller's representative does not attend immediately, then the Insolvency Practitioner may dispose of the seller's goods. It may be difficult for the seller to pursue an action against the Insolvency Practitioner for payment for the goods disposed of in the period between his appointment and the seller's attendance at the premises.
When attending at the buyer's premises, the seller's representative should make an inventory of all of his goods which are on site. If possible, the inventory should be agreed as being an accurate record of what is actually on site and identifiable. The description of the goods contained in the inventory should be sufficient to allow a comparison to be made between the goods appearing on the inventory and the goods appearing on unpaid invoices. Wherever possible, the same description should be used. When the inventory is completed, if possible, the seller's representative and the Insolvency Practitioner's representative should sign the completed inventory.
The seller's representative may choose to take a camera with him and take photographs so as to record the position and condition of the goods at the buyer's premises. He may also take a pack of labels with him which, with the consent of the Insolvency Practitioner's representative, he can attach to the goods to mark the goods as the property of the seller.
It is unlikely that the Insolvency Practitioner's representative would be willing to agree the seller's claim on the day of the preparation of the inventory. It is possible that other sellers will attempt to make a claim to the same goods. It is also possible that the Insolvency Practitioner needs the goods in order to carry on trading.
It is likely that the Insolvency Practitioner will continue trading the business if the buyer is in receivership or in administration. It is unlikely that the Insolvency Practitioner will carry on trading the business if the buyer is in liquidation.
If the buyer is in receivership and the seller is willing to allow the receiver to use or to sell the goods listed in the inventory, then it is likely that the receiver will be prepared to give an undertaking to pay for the goods he uses at the invoiced price or to return them in the event that they are not needed, in either case provided that the retention of title claim is valid.
If the buyer is in administration, then the seller is prevented, by Section 11 of the Insolvency Act 1986, from taking steps to repossess the seller's goods. However, the seller should still identify the seller's goods and prepare an agreed inventory, because if an administrator disposes of goods that are the subject of a valid reservation of title claim, the seller's claim attaches to the proceeds of the disposal of those goods.
Statement of affairs
A specialised form of financial statement setting out the debtor's assets and liabilities - secured, preferred and unsecured. This document is usually prepared on short notice and from incomplete records. It is sworn to by an officer of the company and or by the bankrupt where applicable. The trustee often has a different opinion as to the value of the assets and the extent of liabilities included therein
Statutory Demand
This is a formal demand for payment of an undisputed debt of over £750.00. The demand has to be personally served on an individual or any entity other than a limited company.The debt should be paid within 18 days of the demand being served to avoid further action. Failure to pay the debt can lead to a winding up or bankruptcy petition being issued, based upon the failure to respond to the Statutory Demand.
Third party debt order
If the debtor is owed money then a Court Order can be obtained which requires the company or person that owes money to the debtor to pay that money directly to you. Your debtor's own debtors will not only include trade debtors, but will also include persons who are holding money for your debtor, such as a building society or bank. It can therefore be very useful to obtain and record your customer's bank details at every opportunity - you never know when you may need them.
Warrant of execution / Writ of fieri facias (fi fa)
If you have been able to determine that your debtor has assets, then an individual known as a Bailiff or a High Court Enforcement Officer (formerly known as a Sheriff) can be instructed to seize the debtor's assets and to sell those assets at auction.
The proceeds of this sale (after deduction of expenses) are passed to the creditor so that the debt can be paid. However it should be noted that certain assets are protected, and cannot be removed for sale. Bailiffs work in the County Court, and this process is known in the County Court as a Warrant of Execution. The equivalent process in the High Court is known as a Writ of fieri facias (or fi fa) and is carried out by High Court Enforcement Officers.
Winding up
Winding Up involves the settlement of the accounts and liquidation of the assets of a partnership or corporation, for the purpose of making distribution and dissolving the concern.
This procedure is the most serious action that can be taken against a company.

  • It applies to a company rather than an individual.
  • After the winding up the company ceases to exist.
  • If the company is insolvent at the time, not all the creditors get paid in full.
  • Rules apply and each creditor gets a percentage of what they are owed if there are insufficient funds to discharge creditors in full.
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