Debt Collection in Ireland

The appropriate court in which to pursue a debt in Ireland is dependent on the quantum of debt to be recovered. The District Court has jurisdiction to hear claims for debts up to a maximum of €15,000. The Circuit Court deals with claims between €15,001 and €75,000 and the High Court considers claims above €75,000. For disputes of a commercial nature where the value of the claim is in excess of €1,000,000, an application can be made to have the matter entered in the Commercial List of the High Court. Only certain categories of cases qualify for entry to the Commercial List and the judge ultimately has discretion as to whether to allow entry.

When pursuing a debt in the Irish Courts, the amount due decides the appropriate Court and procedure in which to pursue the debt. In Ireland, there is no minimum amount required to start a judicial process. The procedure varies in each Court, but generally starts with a creditor issuing a warning letter to the debtor for the sum due as described in Section 3 below.

District Court Procedure

Where a claim is up to a maximum of €15,000, the procedure is governed by the District Court Rules. District Court proceedings begin by a creditor issuing a Debtor Claim Notice.

The Claim Notice sets out all material facts on which the creditor relies, the specific amount in question, the relief or remedy sought and the place and date when the claim arose.

The Claim Notice must be stamped with the appropriate stamp duty and issued by the District Court. The Notice must be served by registered post or by personal service on an individual. In the case of a registered company, service is to the registered office of the company. If it is not possible to serve the Notice, a creditor may ask the District Court to allow substituted service by another method. If the substituted service fails a creditor may ask the Court to deem the Notice to have been properly served.

If the debtor pays the amount claimed within 10 days of the service court attendance is not required.

If the claim is disputed, the debtor must notify the creditor of their intention to do so within 28 days of receiving the Notice. This is done by serving the creditor with an appearance and defence. The creditor then serves a Notice of Trial on the debtor at least 10 days before the court hearing.

At an oral hearing, the judge considers the arguments from both sides and decides either in favour of the creditor or to dismiss the action. If the judge considers that a debtor cannot pay the amount through no fault of their own, the judge may grant a stay of execution for a period of time, that is a delay in the payment date. The judge may also make an order for payment by instalments.

If a debtor does not indicate their intention to defend the proceedings, there is no hearing; the creditor must file the required documents with the District Court Clerk. The creditor obtains judgment in default and can then enforce it against the debtor.

Circuit Court Procedure

Where a claim is between €15,001 and €75,000, the procedure is governed by the Rules of the Circuit Court. The Circuit Court proceedings begin by a creditor serving an Ordinary Civil Bill.

A Civil Bill must identify the Circuit and County where the defendant resides, or company is registered and in which the proceedings are to issue. The claim being made by the creditor should plead the contract, the breach alleged, and the amount claimed, and demonstrate that the debtor has been asked to pay the outstanding sum and has not done so.

The Civil Bill must be stamped with the appropriate stamp duty and issued by the relevant Circuit Court. The Civil Bill must be served on the debtor by registered post or by personal service within one year of it being issued. In the case of registered company service is to the registered office of the company. An Affidavit of Service /the Statutory Declaration should be sworn by the individual who effected service.

If the claim is to be defended, a debtor must enter an appearance within 10 days of service of the Civil Bill. Where an appearance is not entered on behalf of the debtor, or an appearance is entered but no defence is filed, a creditor may apply to the Court for a judgment in default of appearance against the debtor. Judgment is given if the relevant documents are lodged by the creditor. A 14 day warning letter must be sent to the solicitor acting for the debtor advising them of the intention to apply for judgment.

Once the judgment has been granted, the creditor may then apply for an execution order to enforce the judgment.

High Court Procedure

Where a claim is above €75,000, the procedure is governed by the Rules of the Superiors Courts. High Court proceedings are started by a creditor serving a Summary Summons.

The Summary Summons must state specifically and with all necessary particulars the amount owed, the relief claimed and the grounds thereof.

The Summary Summons must be stamped with the appropriate stamp duty and issued by the High Court. It must be served on the debtor by registered post or by personal service within one year of it being issued. Where the Summary Summons is to be served on a registered company it should be done by registered post or by leaving the Summons at the registered office of the company. There is also the option of bringing an ex-parte application for substituted service as is the case in the District and Circuit Court Procedures. Once served, the defendant has eight days from the date of service of the proceedings to enter an appearance.

Where an appearance is entered, the matter proceeds before the Master of the High Court by way of Notice of Motion seeking liberty to enter final Judgment. The necessary proofs are the Summary Summons, the Appearance, the Notice of Motion (together with proof of service of same), the Grounding Affidavit sworn by the creditor and any Replying Affidavit. The Motion must be served at least four clear days before the date fixed for hearing of the Motion.

The Master may decide to grant liberty to enter Final Judgment. In this case, the creditor must file in the Central Office of the High Court Judgment Papers together with a Judgment in Pursuance Order. Alternatively, if there is a dispute the Master will adjourn the matter to Plenary Hearing in the High Court.

If no appearance is entered, the creditor may seek judgment in default of appearance from the Central Office of the High Court. This judgment is given if the relevant documents are lodged by the creditor.

The first step in any legal debt recovery action should be to send the debtor a formal letter demanding payment within a specific timeframe. The letter should indicate the nature of the creditor's claim and inform the debtor that court proceedings will be instituted if payment is not received. This is commonly called a warning letter or a letter before action.

In Ireland, a warning letter is a well-established pre-condition in debt collection proceedings, and it is common and advisable to issue one as a preliminary step. The Circuit Court has issued practice directions requiring a warning letter notifying the other side of the creditor's intention to set the matter down for trial.

It is advisable that a demand letter should state the sum is due and owing and put the debtor on notice of the creditor's intention to issue legal proceedings to recover the debt if it remains unpaid after a specific period and to seek the costs of any legal proceedings.

Where a company, having received a 21-day warning letter for a sum exceeding €10,000, has not paid a sum it will be deemed to be insolvent. However, the Courts do not regard favourably a warning letter being used as a precursor to an application to wind up a company.

The business relationship between the creditor and debtor should be clearly documented from the outset. Any evidence that documents the contract should be preserved. This includes for example, the signed contract and any supplemental agreements, orders and invoices, all correspondence, e-mails, third party documents and any other possible evidence that can prove the relationship between the parties.

Active credit control to prevent late payment developing into default or non-payment. Good debt management systems offering alternative methods, for example, payment by instalment.

Where a judgment has been obtained, there are various options for the enforcement of a debt as set out below:

Instalment Order

A creditor could seek a Court Order to arrange for the debt to be satisfied in instalments. The Instalment Order remains in force for twelve years from the date of judgment. Where a debtor fails to comply with an instalment order the creditor's solicitor may issue a Summons on Failure to Comply with an Instalment Order with the District Court Clerk. A hearing date will be allocated, and the summons must be served personally on the debtor at least 14 days prior to the hearing date. If the debtor fails to attend the hearing date, the judge can issue a warrant for the arrest of the debtor, provided the summons was served correctly. The sentence for imprisonment is for a maximum of three months. If the payment or part of the payment is satisfied, the Judge has the authority to direct the release of a person immediately.

The Judge may also treat the proceedings as an application for a variation order and request that the debtor and creditor seek resolution by mediation and adjourned the proceedings with liberty to re-enter in default of agreement.

Sheriff's Office

A local County Sheriff may be instructed to seize any of the debtor’s assets. Proceeds from the sale of assets to cover the money owed will go to satisfaction of the debt owed. The sheriff will write to the debtor first outlining that they seek payment of the debt in order to avoid the necessity of seizing goods to the value of the judgment.

Attachment Order

Where a judgement is obtained against a debtor, and the debit has money owing to them by a third party, an order may be made against a third party to pay the creditor directly. The creditor will make an ex-parte application to the Court confirming the details of the debt which is due by the third party to the debtor and requesting that the third party should attend before the court to pay the debt. The Third party can appear before the Court and dispute their liability.

Appointment of Receiver or Liquidator

A creditor can also bring an application to the Court for an order requiring the appointment of a Receiver over the assets of the debtor or a Liquidator to wind up the company.

Charging Order

A judgement may be charged over any asset owned or part owned by the debtor in favour of the creditor. This will prevent the asset being sold and a creditor would

Bankruptcy

A creditor could seek the adjudication of the debtor bankrupt if certain requirements were met by the debtor situation.  

Where a foreign creditor wishes to recover a debt in Ireland, they should first appoint Irish lawyers. Any jurisdiction clause in the contract should specify where proceedings can be commenced. If the jurisdiction clause provides that proceedings can be commenced in Ireland, depending on the quantum of debt to be recovered, the procedure would then be as outlined in Sections 1-3 in the relevant Court. If the jurisdiction specifies the creditor's country, then judgment must be obtained in that country and enforced in Ireland. In the case of an EU member state this is a simple procedure pursuant to the EU enforcement of judgments regulations Brussels I Regulation, No. 44/2001 and Brussels I Recast Regulation, No. 1215/2012.

In Ireland, documents detailing the non-payment of the debt will be required for the creditor to prove that the debt is in fact outstanding.

These can include the written contract from which the amounts of money to be recovered result; all relevant correspondence and other financial documents, orders and invoices which can support the claim of the creditor, correspondence between the parties in relation to the non-payment of the debt.

Once a warning letter is issued a debtor may choose to pay or dispute the claim. If the demand for payment is ignored or disputed a creditor may choose to issue proceedings. As set out above in Section 2, the creditor will then issue either a Claim Notice, Civil Bill or Summary Summons, depending on the quantum of debt owed.

If this action is ignored by the debtor a creditor can seek to obtain a judgment registered against the debtor.

In Ireland it is extremely difficult to obtain an interim measure such as a preliminary injunction against a debtor because the Court must be satisfied that damages are not an adequate remedy. Consequently, it is only in exceptionally rare cases where for example a company is dissipating its assets that such an application could be contemplated.

The creditor should always investigate the solvency of the debtor before issuing proceedings, either by way of a company office search and/or by employing a private investigator before considering any such action.

If recovery of debt is not possible, a creditor can choose to write off the debt. Evidence of having tried to collect the debt is not required in order to write off a bad debt in Ireland. This is not subject to any legal regulation and is the decision of an individual or company's management.