Read our business owner’s guide to CCJ damage control

As a business owner, you’re constantly juggling many tasks at once. From securing new clients to managing cash flow, the time and financial pressures are constant.

So what happens if a County Court Judgment (CCJ) lands on your desk? Does it cause confusion and panic? Don’t worry, you’re not alone. 

This quick guide breaks down what to do if you receive a CCJ, especially if it’s unexpected, whether you’re trying to prevent one or dealing with receiving one.

Understanding the threat of a CCJ

A County Court Judgement is effectively a court-mandated order demanding repayment of a debt. 

Not responding to one or ignoring it can severely damage your business’s credit rating, making it harder to secure loans, contracts, and make supplier agreements harder to obtain and maintain. 

If unaddressed, it could eventually lead to creditors seeking a winding-up petition which, if passed by the court, would mean that the company would be legally closed down. It’s a serious matter and so swift action is crucial.

Proactive measures to prevent a CCJ

Prevention is always better than cure. Here’s some good practices that can help avoid some of the other steps that could lead to a CCJ being issued in the first place:

  • Maintain Clear Financial Records: Accurate bookkeeping is your first line of defense. Ensure all invoices are sent promptly and payments are tracked meticulously. Your accountant will not only be able to help you here but also offer expert guidance and knowledge in other areas of the business to assist.
  • Communicate with Creditors: If you anticipate payment delays, don’t bury your head in the sand. Reach out to your creditors immediately. Open communication can often lead to goodwill (tight finances are an expected and regular part of business) and more likelihood of negotiated payment plans being agreed to later if necessary.
  • Dispute Incorrect Debt Claims: If you believe a claim is incorrect or inaccurate, gather the necessary evidence and respond promptly. Don’t let a false claim escalate.
  • Seek Advice Early: Even before you think you could be facing financial difficulties, you can get a free initial consultation with an expert advisor. Early intervention can provide valuable guidance and explore options before a strategy becomes a necessity.

You’ve Received a CCJ – What Now?

Despite your best efforts and knowledge, a CCJ has arrived. Here’s how to tackle it:

  • Act Immediately: Please don’t ignore the CCJ. Time is now of the essence so it’s vital that you act.
  • Check for Errors: Before responding, take a little time to verify the details of the CCJ. Are the amounts stated correct? Is all the information accurate? Errors can be grounds for setting aside the judgment.
  • Consider Payment Options:-
    • Full Payment: If possible, paying the debt in full within 30 days will fulfill the requirements of the CCJ and remove it from your credit record.
    • Negotiate a Payment Plan: If full payment is impossible, contact the creditor to negotiate a payment plan. Verbal agreements are insufficient at this stage of the process, make sure to document any agreement in writing.
    • Apply to Set Aside the CCJ: If you have valid grounds such as incorrect information or a lack of proper notice then you can apply to the court to set aside the judgment. This requires both a strong case and legal support and is not to be entered into flippantly as the courts will take a dim view of frivolous responses.
  • Understand the Consequences: Receiving a CCJ can significantly impact your company’s credit rating which could lead to:-
    • Difficulty securing credit or loans on favourable terms
    • Potential loss of contracts and suppliers over financial and repayment doubts
    • Damage to your business reputation as details of CCJ’s are publicly available through The Gazette.
  • Implement Financial Recovery Strategies to strengthen the business:-
    • Review your cash flow: Identify areas where you can cut costs and improve efficiency in advance.
    • Seek professional advice: Your accountant can help you develop a financial plan while insolvency practitioners can advise if financial issues are already starting to mount up.
    • Consider alternative financing: Explore options like invoice financing, asset-based lending or finding new investment if more money is required on the balance sheet quickly.

Chris Horner, insolvency director with BusinessRescueExpert, said: “Most directors and business owners, especially if the business is a small one by size, are used to dealing with setbacks – whether expected or unexpected. 

“And if they are taken seriously and acted upon quickly then most setbacks are not fatal for a company – including CCJs.

“Proactive financial management is essential to preventing CCJs; taking prompt action is crucial when dealing with CCJs and maintaining open communications with creditors can prevent further escalation. 

“Although the most important advice is to pre-empt any action from creditors by getting some independent, impartial advice that will hopefully anticipate and fix any issues that could ultimately lead to a CCJ or worse.”