Using A Third Party Debt Order
In this article we provide an overview and a summary of the benefits of Third Party Debt Orders following an increase in our own success rates by utilising this method of enforcement.
Generally speaking, Third Party Debt Orders are one of the least used methods of enforcement of a Judgment Debt. However, we are seeing an increase in our success rates by using this method of enforcement.
What is a Third Party Debt Order?
A Third Party Debt Order (“TPDO”) recovers funds by freezing and then seizing money owed to the debtor by a third party (usually a bank or building society) to contribute or settle the judgment debt.
The application is most commonly made against a bank and you only need to know the name of the bank, although it does assist if you know the account details. The bank has a duty to search their records for all accounts held in the debtor’s name (as named on the Judgment) so it may be that the debtor will have more than one account that the Order can be used against.
Following an application to court for a TPDO, an interim TPDO will be issued and served upon the third party listing a date for a hearing. Once served, the third party is required to disclose the sum which it solely owes to the judgment debtor within seven days and freeze the debtor’s account(s) to cover all monies to the value of the judgment plus the fixed legal costs of the application. Due to the difficulties this causes, especially to a business, this often results in immediate payment being made by the debtor from other sources so the freezing Order can be lifted.
A crucial aspect to consider when making this application is timing as the entity receiving the Court Order can only freeze any money owed to the debtor on the day it receives the Order, therefore if you know a particular date when the debtor is likely to receive money (for example wages into their bank account or payment from another source) it would be more effective to submit the application in good time prior to that date so it can be served on the bank on the day the money is due to go into the debtor’s account.
The key is to ensure that you obtain and keep up-to-date records of your customer’s bank account / building society details, which will be very important in making the Application. Alternatively, the information may be obtained under a separate Order to Obtain Information, followed by an immediate Application into Court following questioning.
Service of the TPDO
The interim TPDO must be served on different parties, at different times:
Third Party (i.e. bank/building society) – must be served not less than 21 days before the date fixed for the hearing
Judgment debtor – not less than seven days after a copy has been served on the third party but a minimum of seven days before the date of the hearing.
Certificates of service must also be filed not less than the two days before the hearing.
If the third party is a bank upon receipt of the order, they must not pay the Judgment debtor any sum exceeding the Judgment debt, unless a Hardship Order is made. If the third party fails to deal with the Interim and secure the sums owing to the debtor, it risks the Final Order being made in any event and being ordered to pay the required sum. Where funds are available, and subject to the Final Order being granted at Hearing, the Third Party must pay the Judgment creditor the money it holds.
This is a relatively inexpensive way of enforcing a Judgment debt which, in the right circumstances, can be very effective, timing however, is critical.
What type of ‘debt’ can be attached?
- Money held in a debtor’s bank account.
- Rent due to a debtor.
- Joint Judgment against a joint account (e.g. partnerships).
- Executors and Personal Representatives.
- Bills of exchange before maturity.
What type of “Debt” cannot be attached?
- Wages (see Attachment of Earnings Orders instead).
- Debts due from the Crown.
- Assigned debts.
- Debts recoverable out of jurisdiction.
- Debts owed from joint bank accounts where all parties are not Judgment debtors.
Summary of the key benefits of a TPDO
- Costs effective process.
- Money in the debtors account is frozen and seized to pay your judgment.
- Freezing the account may be enough to get debtors to pay voluntarily.
- Can be used alongside other enforcement methods (e.g. securing via Charging Order).
- It is a quick and forceful method of ensuring payment.
If you have any questions about TPDOs or would like to know how the debt recovery team could help you, please contact Greenhalgh Kerr on 0333 200 5200.