After obtaining a Decree (or judgment in England) there are a number of steps that can be taken, if the debtor does not make payment, to recover the outstanding debt. In Scotland this process is known as “diligence”.
Charge for payment (“Charge”)
After the Court has awarded Decree, Sheriff Officers can be instructed to serve a Charge on the debtor if they have failed to pay the sums due. A Charge is a formal notice served on the debtor demanding payment of the principal sums plus interest and expenses, including Sheriff Officers’ fees. After serving the Charge, Sheriff Officers will provide a report indicating whether there are prospects of recovering the outstanding sums by another means, for example, by attaching the debtor’s goods (as discussed below).
If payment is not made within 14 days, the debtor is deemed to be insolvent under s.123 of the Insolvency Act 1986 and, depending on the sums due, an action of sequestration (bankruptcy) can be raised against an individual or partnership, or you can begin winding up proceedings (liquidation) against a company.
Another option is to serve an arrestment on the debtor’s bank account(s). This has the effect of freezing the funds in the account(s) at the time of service of the arrestment and it prevents the debtor using those funds until the arrestment has been lifted. Most funds or goods owned by the debtor and held by a third party can be caught by an arrestment. An arrestment can be instructed at the same time as a Charge or independently. This method of enforcement works very well when you know the debtors bank details.
An earnings arrestment can be carried out where the debtor is an individual and their employers are known. In this scenario, sums are taken directly from the employer in accordance with their payroll cycle.
An inhibition is a form of diligence over all of the debtor’s heritable property located within Scotland.
When an inhibition is put in place it prevents the debtor dealing in any of the properties they own across Scotland. For example by selling the property or granting a standard security over it, until the Inhibition has been lifted. In practice creditors will not lift the inhibition until the debt has been paid. The main drawback of an inhibition is that it will not prevent a mortgage lender from repossessing and selling the property. Inhibitions remain valid for five years but can be renewed. An inhibition can be served at the same time as a Charge or independently.
An attachment can only be served after a Charge has expired without payment. A Sheriff Officer will prepare an inventory of the items within the debtor's property and place a monetary value against each item. The Sheriff officer then submits a report to the Sheriff Court. If the debtor fails to pay the debt then the Sheriff Officer can seize the items and sell them at auction. If the debtor runs a well-stocked business then this method of enforcement can be very beneficial.
After a Charge has expired without payment, Sheriff officers can enter a debtor’s premises and attach money and other items like cheques and postal orders held on the premises (for example in tills and safes). There is a presumption that any money held on the premises is owned by the debtor. Again, this is an excellent method of enforcement where the business is cash rich (such as pubs, clubs and shops).
It is important to carry out some basic due diligence on the debtor prior to enforcing the Decree as the most appropriate method will depend on the assets available. In some cases it might be appropriate to carry out a number of different methods of enforcement at the same time, especially if the debtor owns heritable property.