What exactly is a County Court Judgment (CCJ)?
By itself, a County Court Judgment is purely a court process by which an amount of a debt is agreed as owing by a person or business. By granting judgment, the court will confirm that the debt is legally due and whether it is repayable immediately or over a period of time. The CCJ will then be placed on a public register, and the creditor will be able to apply for further enforcement action to help recover the monies owing.
How many CCJs are registered each year?
The number of CCJs being issued has been significantly decreasing since a peak in 2009. In the first 3 months of 2009, there were 71,861 CCJs registered against businesses in England and Wales. However in the first quarter of 2015, this reduced to 21,860 CCJs, with the average CCJ debt being £3,554.
What does a CCJ mean for my business?
CCJs and your credit rating
If a CCJ is registered against your business, it will be recorded on its credit file. It’ll remain there for 6 years from the date the debt is shown as repaid. As a result, many businesses find that following a CCJ, they have problems:
- Accessing funding
- Obtaining leases or hire purchases
- Agreeing credit terms with customers
- Entering into new customer contracts
- Changing banks
If you trade as a limited company, the above issues are only relevant to the company. However, if you are a sole trader you do not have the same protection. Unfortunately, this means you will also likely suffer with the effects of a poor personal credit history. This means that personal credit or a mortgage will become difficult and/or expensive to obtain.
CCJs: the first step before bailiffs and winding up.
CCJs can be a stepping stone to initiate enforcement / bailiff proceedings against your company. If you haven’t settled a CCJ in full within 28 days of it being registered, a creditor can move to enforce the debt using bailiffs/ enforcement officers.
The vast majority of post-CCJ action taken by creditors is in the form of bailiff action. It is relatively inexpensive compared to a winding-up or bankruptcy petition, but depending on the type of business, it can have just as devastating an effect.
In some cases, an unsettled CCJ will be used as proof of insolvency, and lead directly onto a winding up petition. Winding-up is a formal process to close a business to liquidate its assets and pay off its creditors.
If you are self-employed, then the CCJ can be a first stage prior to bankruptcy proceedings as opposed to winding-up.
How to respond to a CCJ
When you receive a CCJ there is a limited period – only 14 days – that you have to act and protect your business. If you have been issued with a CCJ, see our director’s advice here on how to respond.
If you are concerned about the overall financial health of your business, it is worth getting advice. In the meantime, have a look at some of our other topics, such as:
Or feel free to contact one of our business rescue experts directly for more tailored advice.