Methods of Recovery

The information provided on this page is general guidance only and is not intended to be a statement of the law or any creditor's policies on debt recovery.

Many creditors pursue their own court actions by way of the Small Claims Procedure. The information on this page is provided for party litigants who have obtained a decree from the court and require to take enforcement action. It is also an aide memoire for others involved in the recovery process. A decree does not guarantee that the money will be recovered and party litigants like any other creditor have to decide what is the most appropriate and cost effective course of action to effect recovery. Download our Creditors Leaflet for further information on the practical considerations in enforcing recovery. Recovery is effected by what is known as diligence. The main types of diligence are earnings arrestment, bank arrestment or attachment.For further information on these diligences click on the Diligences Tab

For diligence to be effective the following information on a debtor assists in the recovery process.

  • Place of Employment
  • Bank details
  • Ownership of assets

The extent of information known in these three areas will determine the appropriate course of action. Fees vary depending on the diligence instructed. Fees are payable regardless of whether the diligence leads to settlement or not.

Details of fees for Citation and Diligence can be found on our Fees page.

The Diligence Flow Chart is a brief guide to the order of recovery actions.


The right to enforce diligence may be stopped in certain circumstances in particular where a Time to Pay Direction or Order has been granted or a Debt Payment Programme has been applied for or is in place. If you have been granted an instalment decree or need further information on Time to Pay Directions or Orders, or Debt Payment Programmes go to the Diligence Stoppers Tab

As indicated, diligence will not always result in recovery. There are 2 other methods that can be used in certain circumstances namely Inhibition and Sequestration. We are happy to offer advice on the appropriate use of Inhibition and Sequestration. Further information on the circumstances where they can be utilised and their procedures can be accessed at the tab headings below.

Inhibition

Sequestration

Diligences

Charge

This is the initial step in the recovery process with exception of an arrestment authorised by an ordinary decree which does not require a charge to be served. This is a written, formal demand to the debtor to pay the full outstanding balance to you in fourteen days, with a warning that further enforcement will follow after that period.

The charge in itself does not enforce the court order but is useful in several aspects. It is served in person by a Sheriff Officer attending the debtor's home or place of business, allowing the officer to give a report on the likely recovery prospects and to legitimately gather information about the debtor's circumstances.

It is essential that a charge is served before an earnings arrestment or attachment is executed.

Along with the Charge we will also serve a Debt Advice and Information Pack. In most instances this is required before diligence can be executed. The DAIP can be found on the AIB site.

Arrestment (Bank Arrestment)

This method of enforcement would be appropriate if it was known that the debtor owned funds or goods that are in the possession of a third party. The most common example of this is money in a bank account. A schedule of arrestment is served upon the third party (known as the Arrestee). The arrestee freezes the sums held at credit of the account in excess of the protected limit which is currently £415.00. It should be noted that the arrestment applies only to funds at credit of an account at the time of the arrestment and not to funds subsequently paid into the account. Timing of an arrestment is essential. From a creditor's perspective the arrestment is best placed when it is known there will be funds in the account.

If the arrestment is successful the bank or other arrestee must intimate to the creditor what sums have been attached. There is no similar obligation if no funds are attached. Accordingly if a creditor does not hear from a bank the likelihood is that the arrestment has been unsuccessful. Any attached funds (or a lesser amount required to settle the debt and expenses) are automatically released to the creditor after 14 weeks unless a mandate has been signed authorising release of the arrested sums beforehand or alternatively due to an alternative arrangement the arrestment has been withdrawn. No prior charge is required for a bank arrestment on a Small Claim decree.

It should be noted that this type of arrestment attaches funds due to the debtor by any third party. Accordingly it is the appropriate diligence for such items as redundancy payments, fees due to the self-employed, insurance proceeds or sums due to sub-contractors as examples. Implementation of the arrestment lies with the Arrestee and is therefore largely outwith our control.

Earnings Arrestment?

Following service of the charge and after 14 days have elapsed, an earnings arrestment can be served on the debtor's employer (where that information is known).

Once served the arrestment requires the employer to remit a percentage of the debtor's earnings to you on every pay day. This earnings arrestment remains in effect until the debt is paid or the debtor leaves that employer. It should be noted that there must be an employer/employee relationship and it is not possible to arrest wages if the debtor is operating as a contractor or is self-employed. An arrestment would be required in these circumstances.

Attachment and Auction?

An attachment involves making an inventory of property belonging to the debtor with a view to selling it at auction. The inventory of "moveable" property belonging to the debtor is called attachment and can only be carried out after a charge has been served and the 14 day period has expired. In the first instance, attachment can only be carried out in relation to articles outside a "dwellinghouse”. Items not physically within the house for example in a garage or other outhouse may be attached. Attachment is competent anywhere other than a dwellinghouse and this will cover a place of business, a workshop, office or other commercial premises.

Where the officer has carried out an attachment, the fee is based on the total value of the items included in the attachment. A report of the attachment is then made to the local Sheriff Court.

Following attachment the debtor may wish to pay by instalments. An arrangement can be accepted without prejudicing your right to proceed to auction. However, you may have to ask the court to extend the duration of the attachment which lasts for 6 months in the first instance. If the debt remains unpaid, the officer will proceed to arrange for the uplift of the attached articles for sale by public auction at an auction room. Following the sale a report is made to the auditor of court, the sheriff clerk, who then issues a certificate showing a balance of account.

Exceptional Attachment Order?

There may be circumstances where the creditor would wish to attach assets within a dwellinghouse for example where goods outwith a dwellinghouse cannot be attached or it is believed that there are goods of some value within a dwellinghouse. An exceptional attachment order authorises the valuation and uplift of goods within a dwellingplace. A charge has to be served in the first instance. The creditor must apply to the court for an exceptional attachment order. The debtor will have an opportunity to state their case at a court hearing prior to any order being granted. Before granting the order the sheriff has to consider a number of factors including whether there has been any payment agreement and whether the debtor has received money advice. The sheriff will also take into account whether other diligences have been attempted and whether sufficient will be realised from any attachment and auction to cover all of the expenses and a proportion of the debt itself. Once granted the exceptional attachment order does give officers authority to open and shut lockfast places. An exceptional attachment differs from an ordinary attachment in that the listed goods are uplifted immediately from the dwellinghouse with a view to their subsequent auction.

Money Attachment

Creditors can now attach money, including cash or cheques in the possession of the debtor. The one exclusion to this general rule is that money cannot be attached within a dwellinghouse

The procedure is fairly straightforward in that the Sheriff Officer will attend at the debtor’s premises, following expiry of a Charge for Payment and provision to the debtor of a Debt Advice Pack, and attach sufficient cash and/or cheques value to cover the debt plus costs. The money is immediately removed from the premises by the Officer and thereafter a Report of Money Attachment is made to the Sheriff within 14 days of the attachment. At this point the Creditor (not the officer) is required to make an application for a Payment Order authorising the Sheriff Officer to realise the value of the attached money including appointing the Officer as the irrevocable agent in relation to any cheques for the purpose of cashing these items. The Sheriff Officer then completes a Final Statement of Money Attachment within 14 days of funds being paid to the creditor or, if required, released back to debtor. Speak to an Officer before instructing this diligence as it may involve further charges.

Diligence Stoppers

Time to Pay Direction

A court can grant a time to pay direction (payment by instalments or deferred lump sum) at the time of granting a decree. The terms of the direction will be included in the decree. The court order cannot be enforced until the direction lapses.

The date on which the direction starts is when a copy of the decree is intimated or delivered to the debtor. It is important to have evidence that the decree has been intimated if there is any dispute as to the direction no longer being in force. You can send a copy direct to the debtor. We would recommend this is sent recorded delivery and that you retain a copy of the letter and the recorded delivery slip. If you wish, a Sheriff Officer can deliver a copy by post or in person for you. Once the direction has a start date you have to monitor the payments to calculate if or when it lapses. If payment is by instalments, the direction will lapse if an aggregate of two instalments is outstanding when the next one becomes due, or if payment is in one lump sum it will lapse 24 hours after the due date if any part of the balance is unpaid.

When the direction lapses, you can enforce recovery of the remaining balance. A Sheriff Officer will be unable to enforce the decree unless there is evidence that the time to pay direction has been intimated and that it has subsequently lapsed through missed payment.

Debt Arrangement Scheme

Application may be made by a debtor to the DAS Administrator (the Accountant in Bankruptcy) for the approval of a Debt Payment programme. Once approved the debtor will pay a set amount in specified periods to pay debts due to all creditors. While a Debt Programme is in force no diligence can be executed. For further information, visit the DAS site.

Inhibition

Inhibition is not a diligence that directly leads to recovery of a debt but instead offers the creditor a “form of security”. Once an Inhibition has been executed and registered with Registers of Scotland, it prohibits a defender from dealing with his heritable property. Heritable property is land and other immoveable property (houses, commercial premises etc.) owned by the defender.

If the defender wishes to sell his heritable property, which can include his home, or grant a security or mortgage over it, he must have the inhibition discharged. Creditors will grant a discharge of the inhibition once all their debt and related expenses have been paid. In practice, the funds often come from the sale of the property. It is worth noting an Inhibition will also prevent a defender purchasing new property and can be a useful tool when dealing with buy to let landlords.

An Inhibition lasts for 5 years after which it ceases to have effect. If a creditor wants the protection to continue he must serve a fresh Inhibition.

Inhibition can be very useful where it is known that the defender has heritable property and particularly if you are aware that property is up for sale. One word of warning however is that the Inhibition must be served and registered prior to missives being concluded in a transaction or it will have no effect. The other point to bear in mind is it has no effect if the defender does not sell or grant a security over his property.

AMA will execute an Inhibition on your behalf as well as arranging prompt registration in the Registers of Scotland.

Sequestration

Another method of recovery, which is again not strictly a diligence, is to sequestrate the debtor, or in other words have them declared bankrupt. This is particularly useful where they have assets that cannot be attached in any other way, for example heritable property which includes their home.

An insolvency practitioner is appointed to ingather their estate and use the funds to pay all creditors. It should be noted that the trustee has to deal with all creditors equally and not just the creditor who lodges the petition for sequestration. A solicitor will have to be instructed to lodge any petition and the appointed Insolvency Practitioner has his fees paid first from the estate. For many creditors this can appear an expensive process and it is best to establish before proceeding if there are sufficient assets to cover both the debt and expenses incurred to date but also of the solicitor and Insolvency Practitioner.

Only creditors with a debt or debts outstanding of over £3000.00 can petition for a debtor’s sequestration. In addition it will have to be shown to the court that the debtor is “Apparently Insolvent.” Evidence for apparent insolvency is usually the fact that the debt has not been paid within 14 days after service of a charge or within 21 days of service of a statutory demand. One other point to bear in mind is any petition has to be lodged in court within 4 months of the expiry of the charge or statutory demand.

A solicitor will lodge a petition for sequestration at court. A warrant to cite is issued by the court to be served on debtor ordering the debtor to appear before the Sheriff on a date occurring not less than 6 and not more than 14 days after the date of citation. The date of that warrant will be the date of the sequestration no matter the length of the court process.

Citation of the defender must in the first instance be served in his hands personally. This is not always straightforward to achieve and may require the hearing to be postponed so that service can be effected. The court can subsequently authorise service by other methods but the service requirements can cause delay and further expense.

Sequestration can be awarded at the first hearing after service if the Sheriff is happy with the mode of service and the debtor does not present defences or lodge a DAS application.

In practice the sheriffs often continue the hearing to allow:

  • The debtor to take legal advice
  • Re-service of the petition by any legal means if the Sheriff is not happy with the existing mode of service.
  • Full payment of the debt
  • Security to be put in place for the debt to the satisfaction of the creditor
  • Payment arrangements to be made

These continuances should be for a maximum of 42 days from the date of the original hearing and therefore sequestration should take place within 56 days of the warrant to cite at the most. However, the Sheriff can also continue the petition for whatever period he deems fit if the debtor has applied for a DPP through the Debt Arrangement Scheme.

One final point to consider is that once sequestration is granted, a special request would have to be made to the court for the sale of the defender’s home. This can add a further delay if the defender's main asset is the equity in their home.

It is worth emphasising that sequestration can be a useful tool if the defender has sufficient assets to cover the debt and all the expenses mentioned but creditors also have to bear in mind that it can also be a slow as well as an expensive process. AMA can give preliminary advice on sequestration as well as instructing solicitors and Insolvency Practitioners on your behalf.