Charge for Payments
A Charge for Payment is a legal documents that is served in Scotland by Sheriff Officers and Messenger at Arms. They are served to formally demand payment of money and give only 14 days to make payment. If the Charge is not complied with there are consequences.
When can a Charge for Payment be Served?
If a creditor raises a court action for payment of money and is successful in getting a court order (also known as a decree), then they can serve a Charge for Payment to demand full payment of the money. First, however, they must extract the decree from the court, which they cannot do until 14 days have passed. This is to allow the consumer to appeal the decision if they choose. If there is no appeal the extract decree can then be take to a Sheriff Officer or Messenger at Arms to be served on the consumer.
They then have 14 days to pay the debt in full. If they fail to make the payment, the creditor can then instruct the Sheriff Officers or Messenger at Arms to take further action. This includes executing:
• an earning arrestment;
• a bank account arrestment (a Charge is only required where a summary warrant has been used); or
• an attachment of property held outside the debtor’s home, including an attachment of a vehicle;
A Charge for Payment doesn't need to be served to execute an inhibition.
For certain types of debts, it is not necessary for the creditor to raise a court action before they serve a Charge for Payment. This is possible for debts which are not regulated by the Consumer Credit Act (such as credit cards and bank loans) using a procedure known as summary diligence.
To use the summary diligence procedure, the debtor must explicitly consent to the procedure being used when they take out the debt and it is most commonly used for debts which have been taken out when someone is acting in the course of a business, or where the debt is for a landlord’s guarantee or for a credit union loan.
The summary diligence procedure allows a creditor to register a debt for preservation and execution with the courts, most commonly in the Books of Council and Session. When the creditor believes the debtor has defaulted on the agreement they can extract the registered debt from the Books and deliver it to a Sheriff Officer or Messenger at Arms and instruct them to serve the Charge for Payment. Where the debtor disputes that they were in default, they can challenge the competency of the Charge, by applying for it to be suspended and reduced, whilst interdicting the creditor from taking any further enforcement action on the strength of it. This, however, is a complicated and legal advice should be sought from a solicitor.
Apparent Insolvency and Bankruptcy
A Charge for Payment is also an important document legally, as once it expires, it makes the debtor apparently insolvent. This is a legal term, but importantly means the creditor (or indeed another creditor) can raise a petition for the sequestration (bankruptcy) of the debtor, providing the other conditions for making someone bankrupt have also been met. To use an expired Charge for Payment to sequestrate a debtor, the creditor must do so within 4 months of the Charge expiring.
Although to sequestrate a debtor a creditor must show £3,000 or more is owed by the debtor, it is not necessary for the debt contained in the Charge for Payment to be more than £3,000. The expired Charge proves apparent insolvency. Providing the creditor can show in total, including what is owed in other debts, is more than £3,000, the Charge can be relied upon in any bankruptcy petition.
How to Prevent a Charge for Payment being Served
If it is feared a creditor may serve a charge for payment, there are certain steps that can be taken to prevent them from doing so. First, a statutory moratorium can be registered with the Accountant in Bankruptcy office, providing one has not already been registered within the last 12 months. This prevents creditors from taking any further enforcement action for a period of six weeks. This is a free process and can be done relatively quickly. Statutory moratoriums’, however, only allow some breathing space and it is incumbent on the debtor to obtain advice to find a more long-term solution.
Alternatively, where a court action has been raised, a Time to Pay Direction can be applied for before the court grants decree. If this is allowed by the court, it allows the debtor to enter an installment plan with the creditor and prevent them taking any further action, whilst it is being maintained.
How to Stop a Charge for Payment being used after it is Served
Again, a statutory moratorium can be used, even after a Charge for Payment has been served and has expired. Again, this is only possible if it has not already been used in the past 12 months and only allows six weeks breathing space to allow for a more permanent solution to be found.
Alternatively, even after a court order has been awarded, or a summary warrant granted, the debtor can apply for a time to pay order, which again, allows the debtor to enter an installment plan with the creditor and providing it is maintained, will prevent a Charge for Payment being relied upon for any further action.
Can the Debt Arrangement Scheme be used to stop a Charge for Payment?
The Debt Arrangement Scheme (DAS) as a remedy, can be used to stop a Charge for Payment being served. As soon as an application has been made, no Charge can be served for any debt that is included in the DAS. If the DAS is approved, the protection continues.