My company has a county court judgement; will this affect my personal credit rating?

If you are a director of a small business which receives a county court judgement (CCJ) you may be affected personally even if your company is limited.

If your business owes money which it is unable or unwilling to pay, the creditor will normally apply to the court for a county court judgement. This is an order made by the court to pay the outstanding debt either immediately or in instalments.

A CCJ can not in itself force the company to pay what is owed. However, it will be recorded on a limited company's credit file.

This record may make future borrowing more difficult. In addition, the CCJ may pave the way for the creditor to start a winding up action.

Indirect affects of a CCJ for directors

Where your business is a limited company, you will not normally be personally liable for an unpaid debt unless you have given a personal guarantee. As such, if a county court judgement is issued, this will not effect on your personal credit rating.

However, if you are running a small company, its limited liability will not always protect you from the effects of receiving a CCJ. This is particularly the case if your personal account is held with the same bank as the business bank account.

Your company's bank may become aware that the CCJ has been issued and will then start to have concerns over the prospects of the business.

If your personal affairs are managed by the same bank and you want to apply personally for additional credit, this may be rejected on the basis that your source of income is deemed as being unstable.

It is conceivable that a bank may use a similar argument as the reason for reducing personal borrowing facilities such as an overdraft or credit card limit.

Sole trader's CCJ liability

If you are a sole trader and the business receives a CCJ, you are personally liable for this debt. This means that the judgement will be recorded on your personal credit file and will have a negative effect on your credit rating.

If you want to apply for any further borrowing either in the name of the business or personally, the fact that a CCJ has been issued will be highlighted.

This may prevent your application from being successful and may also trigger alarm bells at your bank about the sustainability of your income. The knock on effect of this could well be a reduction of your overdraft facility and / or credit card limit.

If you are a sole trader, you are personally liable for debts which the business incurs. As such, any CCJ will be recorded against you directly and will work against you if you want to borrow more in the future.

As the director of a limited company which receives a CCJ, this will not directly affect your personal credit rating. However, you should be aware that the effects of the CCJ may still prevent you from borrowing more or may even trigger your bank to reduce your credit facilities as questions over the sustainability of your income are raised.

If your company has financial troubles talk to use about solutions for your situation http://www.company-debt.co.uk/

Derek Cooper is Managing Director of Cooper Matthews Limited and a member of the Turnaround Management Association UK.

Cooper Matthews specialise in Business Debt Rescue providing straight forward insolvency advice for business owners with business and personal financial problems. They have significant experience in working with small to medium sized businesses, working with Directors, Sole Traders and Self Employed.

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