If a County Court Judgment (CCJ) has been issued against your company interest can usually be added. This acts as an incentive to make sure the debt is paid as quickly as possible. Generally speaking the Court will allow Statutory Interest at the rate of 8%.
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Is Statutory Interest always added to a Company CCJ?
A trade creditor can and normally will add Statutory interest to a debt after a County Court Judgment has been issued. The rate of this type is interest is currently set at 8% per annum.
Statutory interest is the interest which the Court assumes can be added to a debt where there is no previous agreement to charge interest. For example if a debt has built up after non payment for the supply of goods or services from a trade supplier.
Under the County Courts (Interest on Judgment Debts) Order 1991 interest cannot be applied to CCJ debts in certain circumstances. One of these which is relevant to company debt is where the Judgment is issued for less than £5000.
Can Contractual Interest be added to a CCJ?
If the debt owed is based on a financial agreement Contractual Interest is the interest charged under the terms of that agreement. With this kind of debt additional interest can only be added after a CCJ is issued if the agreement specifically provides for this.
However even if provision to charge interest is provided there are certain requirements that must be satisfied. First the creditor must provide the following statement in the default notice they forward to the company:
You should be aware that if we take you to court and get a judgment against you requiring you to pay us the money you owe us under the agreement, you may have to pay us both the amount of the judgment and the interest under the agreement on all the sums owed by you at the date of the judgment until you have paid these in full. This means that even if you pay off the whole amount of the judgment, you may still have a further sum to pay.
Once the Judgment is in place the creditor must then notify the company that they they intend to charge additional interest. They are not allowed to add interest until they have done this.
They must indicate the following in their notification:
- The outstanding balance on which interest will be charged
- The rate of interest that will be charged
- The date the interest will run from
- That you can ask the court to change the interest rate and the instalments you pay
The creditor has to send the company a new notice every six months if they want to keep charging interest. The notice must start how much interest has been added and the interest rate. If this is not received they are not allowed to charge interest until a new notice is sent.