Third-party debt orders: when a judgment creditor freezes a company bank account

In England and Wales, a judgment creditor can ask the court for a third-party debt order against money held for the debtor by a bank or other third party. An interim order can freeze money in the company account before the final hearing, so a business can lose access to working cash even though the court has not yet made the final payment order.

A third-party debt order is an enforcement tool after a judgment has not been paid

HM Courts and Tribunals Service guidance says a creditor can apply for a third-party debt order after obtaining a judgment where the debtor has failed to pay the judgment when due or has missed required instalments. The procedure can target money held by a bank, building society or another third party that owes money to the judgment debtor.

This is therefore different from an ordinary bank freeze caused by KYC, fraud review or insolvency. The bank is responding to a court enforcement order. A company that receives notice should obtain legal advice on the judgment and enforcement procedure rather than trying to persuade the bank to ignore the freeze.

The court can make an interim order before the company is told

HMCTS says that if the judge is satisfied with the creditor's application, the court can make an interim third-party debt order. The order is first sent to the third party. A copy is not sent to the debtor until seven days after it has been sent to the third party so the money can be frozen before the debtor receives notice.

That sequencing explains why management can discover the restriction from the bank rather than from the creditor. The interim order specifies the amount the third party must retain. The company can still have a larger account balance, but the ordered amount becomes unavailable pending the court process, subject to the bank's rights and the terms of the order.

A bank served with an interim order must identify the debtor's sole-name accounts

Civil Procedure Rule 72.6 and HMCTS guidance require a bank or building society served with an interim order to search for accounts held in the sole name of the judgment debtor. Within seven days it must provide prescribed information about identified accounts, including whether they are in credit and the relevant balance where it is insufficient to meet the order.

The bank can also state whether it claims rights over the balance, for example through set-off. A company with an overdraft, loan or other banking relationship should therefore not assume the headline current-account balance equals the amount ultimately available to the creditor.

The order captures money held when it is served, not whatever arrives weeks later

HMCTS guidance emphasises that timing matters because the order freezes money held in the account on the day the interim order is received by the third party. Later receipts are not automatically added to the same frozen amount under that order.

For a company, this can create a sharp liquidity shock if the order is served immediately after a large customer receipt. Conversely, an account with little credit on the service date may not satisfy much of the judgment. Do not attempt to manipulate balances once legal enforcement is known; get advice on lawful options and disclosure obligations.

The judge decides at the final hearing whether the frozen money should be paid to the creditor

The interim order contains a hearing date. HMCTS says the debtor and third party can file evidence objecting to the application, generally at least three days before the hearing. The judge then considers the evidence and decides whether to make a final order requiring the third party to pay the creditor.

If the frozen amount is enough, the final order can cover the judgment debt and relevant costs. If it is not enough, the available amount can be paid and part of the judgment debt remains outstanding. A company should treat the hearing timetable as a legal deadline and coordinate evidence through its solicitor rather than relying on operational staff to argue with the bank.

A company cannot use the individual hardship-payment procedure, so liquidity planning matters immediately

HMCTS says hardship payment orders are available where the judgment debtor is an individual, not a firm, company or corporation. A company whose operating cash is frozen therefore cannot rely on that personal hardship route to release wages or living expenses.

Management should immediately map payroll, tax, supplier and debt deadlines and speak to legal and insolvency advisers where the freeze threatens solvency. Do not divert company receipts to a director's personal account to bypass the order. The correct response combines legal challenge or settlement where appropriate with a lawful cash-flow plan for the business.