In 2018, the UK saw a large decrease in businesses being issued with County Court Judgements (CCJs). A record low of 276,097 CCJs were issued; a 13 percent drop from the previous year.
If a business falls into financial trouble and is unable to repay arrears, or they choose not to pay, a final resort for the creditor may be to apply for a CCJ against the debtor. It can affect you and your business, depending on your legal entity. For example, if you are a sole trader, you can be held personally responsible for the debt. As a limited company, a director or owner will not usually automatically be held responsible for unpaid debt unless they have given a personal guarantee. The long-term damage that a CCJ can do personally however, is usually underestimated.
A CCJ is not the first port-of-call. Most of the time, many attempts will have been made by the creditor, from an internal collections team where no resolution has been agreed upon. A business will typically have 14 days to respond to the CCJ by completing the necessary paperwork. If you fail to respond to the court, it will undoubtedly issue the CCJ. This can have a dramatic effect on your business and your position as a company director.
Consequences of a CCJ can be long-term, both for personal finances and as a business owner. A CCJ will remain on your credit file for six years and will affect your chances of accessing competitive lines of business funding during this time. The effect of a tarnished credit file could also change the terms suppliers enter into business with you. Just like any other creditor, suppliers could refuse to extend credit to your company. A CCJ cannot actually force the company to repay its debts. However, it may represent the start of a slippery slope which can result in the winding-up of your company.
If you find your business in this situation, acting fast can reduce the impact and improve chances of a better outcome. Ensure that paperwork is completed within the given time frame and seek legal advice.
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