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Debt chasing

In the current climate, it is an unfortunate, but nonetheless real problem, that people find that debts due and owing have not been paid.

The Contract

The first thing which needs to be examined by anybody considering collecting a debt, is to establish exactly where the contract was formed and, more importantly, what, if any contract exists, the time limits on paying are.

Where there is no contract, it will come down to the verbal communications between the parties.

In relation to such a situation, it is important to be aware of the existence of the European Community’s Late Payment in Commercial Transactions Regulation which inserts a clause in any contract, written or oral, that payment should take place 30 days after the date of the acceptance of goods etc.

The same regulation goes on to insert a rate of late interest payment (7% above the ECB rate) and it also goes on to impose a series of administrative penalties for the debtor chasing payment.

Jurisdiction

As and from January 2010, any debt under €2,000 can now be taken in the small claims court. This used to be restricted to non-commercial transactions.

After the sum of €2,000, claims up to €6,350 can be taken in the District Court, claims up to €38,500 can be taken in the Circuit Court and after that claims can be brought to the High Court.

Time Limits

You have 6 years from the date of the creation of a contract and performance of that contract to chase a debt.

Costs

It is worthwhile to note that costs are generally recoverable (save in the small claims court) from the debtor.

Enforcement

Where you have been a successful party in litigation to recover a debt, the next question often is what steps can be taken at that point.

  1. Having taken up the order, you can register a Judgment against that person. That Judgment can be registered against the person personally or if they have property as against that property.
  2. The Sheriff – You can present your order to a sheriff and ask the sheriff to send a baliff to collect. This is normally not a favourite option, as the sheriff has to be satisfied that the goods in question belong to the debtor and not some third party.
  3. Examination as to means by a Court – This is perhaps the more tried and trusted method whereby you would summons the debtor to attend in court for the purposes of being examined as to their means to discharge the debt i.e. by monthly instalments.

Last year there was much concern when the Supreme Court held that the powers of the District Court Judge to arrest a defaulting debtor and have them conveyed to prison was unconstitutional.

A new regime has now been introduced by the Enforcement of Court Orders Act 2009.

The debtor is summoned to court and their means will be examined, at that point a Judge will make an instalment order.

Where the creditor complains that the instalment order has not been complied with the debtor again can be summoned to court and the Judge will examine the matter to see whether or not the instalment order has been complied with.

If the Judge feels that the order has not been complied with, the Judge will have a series of options which include making an order sentencing the debtor to prison for up to three months, should the debtor fail to comply with the instalment order a further time.

Where a Judge finds that a debtor is unwilling or deliberately avoiding payment of a debt, the Judge at that point can activate the jail sentence and commit the defaulting debtor to prison.

What to watch out for

It is imperative to remember that two issues always seem to arise in these situations where matters end up before court.

  1. Where a debtor is not responding to communications, this is usually an indication of the need to move swiftly.
  2. If it has commenced accruing, it is always best to consult with someone to ascertain whether or not they are better off taking a precautionary step to protect their position and priority rather than wait.

Dermot F. Conway
Conways Solicitors

dermot@conways.ie
+353214901000

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