Debt Recovery: Using A Third Party Debt Order

Debtors are becoming more sophisticated in avoiding enforcement of a debt. This is partly due to the exchange of information through some online forums. However, there is always a solution to every problem. There are many enforcement options, one of them being a Third Party Debt Order, formerly known as a Garnishee Order. Here, we focus on the pros & cons and other relevant details of Third Party Debt Order. 

Third Party Debt Order is basically a method of legally enforcing a County Court Judgment (CCJ) by obtaining payment from a third party that owes money to your debtor. This approach is often used by creditors who know the debtor’s bank account details or they are aware of a large contract the debtor may have. 

The major benefit of using a Third Party Debt Order to enforce your debt is that you retain an element of surprise. The debtor will not know when you make the application and they will not be notified until after you have served the third party with the Court Order. By the time the debtor is made aware of your application and Court Order, their bank account or funds held by a third party have already been frozen. 

The problem with a Third Party Debt Order is that it can be a gamble. If the debtor’s bank account is held jointly with another person that does not owe you money, your application will be rejected. Even if the bank account is in the debtor’s sole name, the order will be ineffective if the account is not in credit on the date you serve the order. Likewise, if the sums held by the third party, other than a bank or building society, are not due to your debtor on the date you serve the order, the order will also be ineffective. For example, if the invoices issued by your debtor to a third party are still within the credit period and not payable yet, the sums will not be frozen and paid to you.

A Third Party Debt Order will not accelerate the time for payment because a Judgment creditor cannot, by means of a Third Party Debt Order, stand in a better position than the Judgment debtor did with the third party. 

In light of the above, the date you serve the Third Party Debt Order will be crucial to increasing your chances of success. If you believe a Third Party Debt Order could work for you or you would at least like to try and enforce a debt this way, we have set out the process below for guidance. However, we would always recommend using or at least obtaining advice from a Solicitor before taking this action. 

Third Party Debt Order Procedure:

  1. Obtain a County Court Judgment (CCJ)
  2. Complete Court form N349 and send the application to Court with a Court fee of £119.00. Note – It may be essential to serve the Order on a particular date when you believe funds will be available. If that is the case, ensure you notify the Court that you wish to serve the Order yourself.
  3. Court will issue an Interim Order with a hearing date.
  4. Serve the Order on the Third Party. Once served, file a certificate of service with the Court.
  5. The Third Party will write to you disclosing the amount available/frozen. If it is a bank, they will also disclose any other bank accounts the debtor may have. Send this correspondence to the Court.
  6. Prepare for and attend the hearing listed at Court.
  7. Obtain the Final Order and serve on the third party (if not done so by the Court) and await for the funds to be sent to you.

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23 August 2016