Third party debt order
Disputes & Litigation

A Third Party Debt Order is an order obtained by a judgment creditor requiring a third party to pay the judgment creditor directly, the sum that is owed by the third party to the judgment debtor. Such third parties are frequently banks who owe money to the judgment creditor by virtue of their bank accounts. The judgment debt is discharged or reduced by direct payment of a sum owed by the third party to the judgment creditor. Such orders are obtained to execute judgments arising from UK litigation.

The value of such orders is due to the fact that most people operate bank accounts. When a bank account is in credit to the account holder, the bank owes the account holder that sum. It is this sum that is sought to be ordered to be paid to the judgment creditor by the court order. The availability of the method of execution does not lie exclusively through financial institutions, as it applies to ‘any debt due or accruing due to the judgment debtor from the third party’. Moreover, it may apply to debts falling due or maturing in the future, and not merely due at the date of an interim order, such as payments of rent, unascertained debts, interest payments, foreign currency accounts (held in the jurisdiction) and judgment debts owed to the judgment debtor itself. Foreign debts may not be made the subject of the method of execution.

The creditor first applies for an ‘interim third party debt order’ without notice to the judgment debtor, which freezes the account of the judgment debtor. Once a third party has been served with the order, it is liable to pay the judgment creditor from their own pocket if they allow or cause the account to be dissipated or debt to be reduced.

The interim third party debt order issued by the court will specify the date when the court will consider making a final third party debt order. At the hearing, the court will also hear from interested third parties (i.e. others that lay a claim to the frozen fund), if any. The court maintains a discretion to discharge the interim order, vary its terms in the final order or direct a trial of the issues arising.

If it is the case that the order causes the judgment debtor financial hardship, the debtor is at liberty to apply for a hardship payment order, which must be supported by evidence of the circumstances of the hardship. Payments made pursuant to a hardship payment order do not necessarily need to be made directly to the judgment debtor.