Operation Cashflow: Options for collecting bad debts

Farmers struggling to pay their bills – that’s a common theme on the Money Mentor pages. Last week, we saw the other side of the coin.

Geraldine and David are struggling because farmers are not paying their bills. David is a contractor who carries out baling and other work throughout the season. He is always busy, so the problem is not the work but the farmers who are not paying their bills.

They are owed €30,000 to €40,000 in total and this is putting them under pressure, as they have a farm themselves and their own loans to repay. David hates having to make the calls and many do not return the messages he leaves. When he visits their homes, some farmers have simply refused to pay and have even gotten another contractor in to do their silage.

Money is tight and a lot of farmers are trying to juggle bills. However, when someone does not uphold an agreement and does not return your calls, you have every right to be frustrated.

I always find in these cases it is the one that shouts loudest that gets heard (or paid in this case). However, if you feel there is no point approaching a farmer again, there is a very clear legal process available to you.

The first step

The first step is to send the farmer a solicitor’s letter stating that if he has not repaid you in 10 days, you will be issuing proceedings against him. This does not cost much. However, once you start this option, be prepared to move quickly along the process. Talk to your solicitor and have proceedings ready to be entered into the court if he does not reply.

Debts of up to €6,350 are dealt with by the district court, while debts from €6,350 to €38,092 are heard in the circuit court, which is where this farmer would go. The farmer has the right to contest it and, if he does, you will be informed of a court date.

If uncontested, no court hearing takes place and a judgment is issued on receipt of an Affidavit of Debt in the court office, sworn by you as the creditor. What you are looking to get is a judgment against the farmer for the debt.

Getting the judgment does not guarantee payment, but once you register the judgment in the central office of the High Court, it opens up options to enforce it. Registering the judgment also publicises the fact that there is a judgment against the farmer and, as a result, they are unlikely to be able to borrow further.

After the judgment

After the judgment has been obtained in court, the farmer can be called to attend the district court. Here, his means will be examined. The judge will decide the level of weekly/monthly debt payments the debtor can make and will usually make an instalment order, directing the debtor to make the repayments.

Repayments will commence once the order is served on the farmer. Instalment orders are only applied to individuals and not companies. If the debtor does not make the repayments, the creditor can go back to the district court and seek to have the debtor committed to prison for non-payment by a committal order.

However, I doubt you want to go down that route. One option open to you once you have a judgment is a garnishee order. It is where you know the farmer has money due to him from someone else that is not yet paid.

You can apply to the court to have the money paid directly to you. The reason this is an option is that you know that the majority of farmers have Single Farm Payments due to them from the Department of Agriculture. You also know that it will not be paid before 15 October.

Other options

There are other options such as receivership by way of equitable execution, which means getting the sheriff in. The sheriff is a civil servant whose responsibility it is to seize and sell goods belonging to debtors in the discharge of debt.

You could also apply in court to have a judgment mortgage registered on the deeds of the debtor’s property. This effectively prohibits any dealings with that property, unless the relevant debt is discharged.

Finally, if the farmer fails to have a debt repaid on foot of a judgment, one option open is to declare the debtor bankrupt. Again, this is a serious incentive for the farmer to repay, if they have the means to do so.

While all these options are available, I’m sure you really don’t want to go the legal route if at all possible.

I would go to the farmer one last time and tell him that if he does not start repaying, you will have no choice but to issue legal proceedings in order to save your own business.

At the other end, focus on farmers that do pay. Get cash before you leave the gate or send an invoice immediately and follow it up with a reminder 30 days later. You have to put in a proper system in order to get paid and avoid getting into this situation again.