What is a County Court Judgment (CCJ)?
If creditors (i.e. people/companies you owe money to) have been unsuccessful in recovering debt from a business owner, either because the owner is unable or unwilling to pay, they may take the decision to apply for a County Court Judgement (CCJ).
A CCJ is usually the last step creditors take when attempting to recoup debts that they are owed, so you won’t find yourself suddenly faced with a CCJ out of the blue. Before a CCJ can be applied for, your creditors must send you a warning letter. This should detail what they are owed and what you need to pay them, otherwise they will begin legal action.
If you fail to reach an agreement with your creditors, then they can apply for a CCJ.
Will a director be personally affected?
When a company does get a CCJ, it will affect the company’s credit rating. Unless you as the director have used some sort of personal guarantee connected to the business, your credit file should remain unaffected.
However, if you conduct your personal banking with the same bank as you do your company banking, a CCJ against your business may affect your personal borrowing capacity. This could include mortgages, overdrafts or credit cards.
Additionally, your bank may view your income as unreliable which could cause problems for you personally.
The responsibilities of a director during a CCJ
Initially, you will receive a County Court Summons. You must respond to this within 14 days, but you can apply for a further 14 day extension.
If you do not respond to the summons or your negotiations with your creditors are unsuccessful, the CCJ will be issued against your company. The court must agree that the debt is valid to do this.
Once the CCJ has been issued you have 30 days to pay the debt in full. If you do not, the CCJ will be officially registered by the court, and the relevant credit agencies will be informed.
By not paying the debt during this 30-day period, you validate the creditor’s claim against you and prove that your company is in an insolvent position (i.e. not able to pay its bills when they are due). This is a terrible position to be in as a business owner – because you could be issued with a winding up petition and eventually compulsory liquidation.
Seeking professional help
If you are faced with the prospect of a CCJ, it can be a pretty daunting for you. It is essential that you act quickly.
You should speak to your Accountant and / or seek professional from of a Licenced Insolvency Practitioner such as Clarke Bell – as we have a wealth of experience in helping directors to deal with an insolvent company. There are a range of options that might be suitable, including:
We will give you free advice on which option is going to be the best one for you – taking into account the legal obligations you have to the creditors of your company.
Clarke Bell provides helpful advice for company directors, as well as explaining the legal rights that your creditors have at this time.
We may even be able to help with negotiations with your creditors before the CCJ is finalised. It all depends on your specific circumstances.
If you’re having trouble with your creditors, give us a call today 0161 907 4044.