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The Legal Process

When a debt is owed and there is a delay or difficulty in receiving payment, then it may be necessary to instruct a solicitor to take appropriate steps to recover the debt including, if required, issuing legal proceedings. In Ireland, the debt collection legal process is essentially a four-step process starting from the initial formal demand for payment and ending with the enforcement of a Judgment.

What follows is a step by step guide to the process.

Step 1: Letter of Demand

The first step in the process is to send the debtor a demand letter stating that a sum is due and owing and putting the debtor on notice of your intention to issue legal proceedings to recover the debt if it remains unpaid after a specific period, usually 10 days. The letter will also usually put the debtor on notice of your intention to seek the costs of any legal proceedings.

The demand letter is sometimes enough to encourage the debtor to discharge the debt or enter into an arrangement to pay off the debt and can be a cost effective means of debt management.

Step 2: Issuing Proceedings

If a satisfactory response is not received to the demand letter, the next step in the process is to draft and issue legal proceedings as soon as possible. Once issued, the proceedings can be served on the debtor. Proceedings can be issued in the District Court, Circuit Court or High Court depending on the amount of the debt.

District Court:     amounts up to €6,348

Circuit Court:      amounts from €6,349 to €38,092

High Court:         amounts over €38,093

Step 3: Obtaining Judgment

The purpose of resorting to legal action is to encourage the debtor to pay. If at any stage during the process the debtor discharges the debt proceedings can be discontinued. If however the debtor fails to discharge the debt, legal action continues and proceedings are filed with the court seeking judgment. The process involved depends on whether or not court proceedings are contested by the debtor and in which court the proceedings are issued.

See the tables below:

District Court

Contested

Uncontested

  1. Civil Summons is served on the debtor – the originating court proceedings setting out the claim and amount alleged owed
  2. Debtor files Notice of Intention to Defend – court papers indicating debtor intends to contest the case
  3. Court date fixed
  4. Hearing –  case is heard before Judge who decides whether to issue an order for judgment, called a Decree
  1. Civil Summons is served on the debtor –  the originating court proceedings setting out the claim and amount alleged owed
  2. Debtor fails to respond
  3. Affidavit of Debt is filed with the Court – a declaration of the debt sworn by the creditor and lodged with relevant judgment papers
  4. Summary Judgment – Decree issued once court is happy the necessary proofs are in order

 

Circuit Court

Contested

Uncontested

  1. Civil Bill is served on the debtor – the originating court proceedings setting out the claim and amount alleged owed
  2. Appearance entered by debtor                       – formal document indicating debtor intends to answer claim
  3. Notice for Particulars – pleading delivered by debtor seeking further information about the claim to which the creditor sends Replies
  4. Defence – The debtor must deliver a defence within a prescribed
  5. Notice of Trial – creditor serves debtor with a formal Notice advising of hearing date
  6. Hearing – Each side presents its case and the Judge makes a decision
  7. Judgment  – If the creditor proves his case a judgment issues
  1. Civil Bill is served on the debtor                       – the originating court proceedings setting out the claim and amount alleged owed
  2. Debtor fails to enter an Appearance
  3. Affidavit of Debt is filed with the Court – Declaration of the debt and other matters sworn by the creditor and lodged with relevant judgment papers
  4. Summary Judgment – If undefended, the relevant judgment papers are filed with the Circuit Court Office and an Execution Order is issued in favour of the creditor

High Court

Contested

Uncontested

  1. Summary Summons is served on the debtor – the originating court proceedings setting out the claim and amount alleged owed
  2. Appearance entered by debtor – formal document indicating debtor intends to answer claim
  3. Motion seeking Judgment – creditor makes an application to the Master of the High Court for judgment by way of Motion and grounded by sworn affidavit
    – the debtor can reply to the claim by sworn affidavit
    – if the Master is satisfied that the debt is due and owing, liberty to enter final judgment is granted
    – however, if satisfied that the debtor has a genuine dispute the case is sent for a   plenary hearing
  4. Plenary Hearing
    – full hearing of the merits of case either on oral evidence or affidavit
    – a High Court Judge hears the case and makes a determination

 

  1. Summary Summons is served on the debtor – the originating court proceedings setting out the claim and amount alleged owed
  2. Debtor fails to enter an Appearance
  3. Affidavit of Debt is filed with the Court – Declaration of the debt and other matters sworn by the creditor and lodged with relevant judgment papers in the Central Office of the High Court
  4. Summary Judgment – the Central Office reviews the papers and issues judgment in the form of a Fifa Order

 

Step 4: Enforcement

If judgment is obtained and the debt remains unpaid, the next step in the process is to look to recover the monies owed through enforcement of the judgment. There are several options, including:

Publication: a judgment can be registered in the Central Office of the High Court. This may lead to details of the judgment appearing in the Stubbs Gazette and other publications which will adversely affect the debtor’s credit rating.

Instalment Order: this procedure is used where the debtor is an individual, sole trader or in a partnership as opposed to a limited company. The debtor is served with proceedings for attendance at the District Court for an examination of his/her means. The debtor is obliged to file a ‘statement of means’ and is cross-examined on his/her ability to pay the debt. At the return date, the debtor’s financial circumstances are considered and if appropriate an Instalment Order is made directing the debtor to pay the judgment debt and legal costs by installments.

Committal Order: if the debtor fails to make the instalment payments as directed under the Instalment Order it is possible to make an application to the District Court seeking a committal order, i.e., have the debtor arrested and imprisoned. At the return date the Judge may direct that the payments are varied or, if it is evident that the debtor is refusing to pay instalments or is simply ignoring the Order, make a committal order.

Garnishee Order: an application can be made for a Garnishee Order directing that money owed to the debtor by a third party is paid to the creditor. This type of remedy is useful where the creditor is aware that the debtor is looking to dispose of an asset, such as the sale of a house, or where the debtor is due to receive compensation arising from an injury claim or other litigation.

Lodgement with County Sherriff’s Office: a judgment can be lodged with the County Sheriff for enforcement. The County Sheriff is an officer of the court who may seize goods of the debtor, sell the goods, and then use the funds to discharge the debt. The Sheriff receives a set commission for seizing and disposing of the debtor’s goods.

Judgment Mortgage: once judgment is obtained, the creditor can make an application to have a Judgment Mortgage registered on the deeds of the debtor’s property. Once registered, the Judgment Mortgage remains a burden on the property for a period of 12 years. This effectively prohibits any dealings with the property unless the debt is discharged. The creditor can take a further step and seek an Order for Sale compelling the sale of the property to discharge the debt.

Winding-Up Petition: where judgment is obtained against a limited company and the debt remains unpaid, the creditor can file a petition for the winding-up the company on the grounds that it is insolvent and unable to pay its debts. The company must be put on notice of the threatened winding-up. The threat of a winding-up of the company may well encourage the debtor to make arrangements to discharge the debt.

Bankruptcy Proceedings: if a debt remains unpaid, bankruptcy proceedings can be taken against an individual. This can be a costly process but the threat of bankruptcy may encourage the debtor to enter into arrangements to discharge the debt. However, it should be noted that the recently enacted Personal Insolvency Act, 2012, has made significant changes to the bankruptcy laws in Ireland which impacts the debt collection process. For more details, click on our Personal Insolvency Act link.

If you have further queries regarding the debt collection process please contact us or simply click on the Frequently Asked Questions link on the right.


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tel: 061 599 033 email: info@bmsolicitors.ie visit us: 64 O'Connell Street, Limerick Opening Hours: Monday - Friday 9.00am to 5.30pm. Saturdays by Appointment

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