Creditor applications to deduct debts straight from debtors’ pay packets soared 15% in the year to 30 June 2012, according to new research.
Legal information provider Thomson Reuters Sweet & Maxwell revealed that creditors made 61,648 applications in the courts for attachment of earnings orders over the year, up from 53,451 applications in the previous 12-month period.
The firm claimed that the simplicity and reliability of attachment of earnings orders, which allows creditors to deduct the debts owed to them from individual debtors’ wages, has appealed to creditors during the recession.
Marc Curtis-Smith, Managing Director of one of the UK’s leading Commercial Debt Recovery firms Federal Management, said: “Attachment of earnings orders are a relatively straight forward option to creditors seeking payment”
“It is a valid option where the debtor has repeatedly failed to honour payment plans or is simply refusing to co-operate with the terms of a CCJ.”
The research also found that traditional methods of debt recovery have declined.
Applications for charging orders, which give creditors the rights to the income from the sale of a debtor’s property, were down 22% to 77,856 last year, from 99,961 in the 12 months to 30 June 2011.
Orders of sale, which force debtors to sell their property for the benefit of their creditor, fell 23% from 426 to 329 over the same period.
Curtis-Smith also warned that debt recovery tools related to property are complicated procedures and that they are often prone to delays.
He added: “In areas where property prices have not risen by much, or even seen a decline in value, it can be hard for claimants to recover all of their debt from a property sale. In this situation, a forced sale of assets may not be in the best interests of either the creditor or the debtor.
“The benefit of an attachment order is that even if a debtor doesn’t have a property, so long as they are in employment, the creditor should see some of their money, if not all”
Thomson Reuters Sweet & Maxwell claimed that public sector bodies, such as HM Revenue & Customs, are also making use of private sector debt collection agencies and methods of debt collection, including attachment of earnings orders.