8th February 2016

Is Carbonite The Best Way of Freezing a Debtor?

Han Solo. The loveable rogue from the Star Wars saga; besotted by Princess Leia, best friends with Chewbacca the Wookie and cherishes nothing more than his prized spaceship: The Millennium Falcon.

However, those who have followed the Star Wars series will recall Han ran up quite a hefty debt with Jabba the Hutt, making several excuses as to why he couldn’t repay. His inability to stump up the cash ultimately led to Han being captured and frozen in carbonite as punishment.

Could Jabba have taken some other steps to avoid such an extreme measure!?

Why didn’t Jabba just have the Millennium Falcon arrested?

Vehicles such as expensive sports cars or luxury yachts are often the first items that spring to a creditor’s mind when considering how to recover the debts they are owed. However, this option may not be as attractive as it first appears. The vehicle must be owned outright by the debtor and cannot be leased to them, for example obtained by hire purchase. Given that the Millennium Falcon was Han’s (having won it in a bet from friend and fellow smuggler Lando Calrissian), why did Jabba not seize this as repayment?

Well, although it was Han’s main and beloved asset, once arrested the vehicle is stored and then auctioned. The difficulty being that frequently the price obtained is only a fraction of the actual value of the asset. It is therefore unlikely that auctioning off such a “piece of junk” would have been sufficient to redeem Jabba’s debt.

Well, what about freezing Han’s bank account?

One of the most effective methods of recovering a debt is via bank arrestment. Unlike many other types of debt recovery once a court order is obtained for payment no further notice needs to be provided to the debtor. This has the advantage of not tipping the debtor off and preventing them from having the time to move their assets off world and out of reach. Provided the bank account is in credit and exceeds a minimum protected balance, the account is frozen and after 14 weeks, if the debt is still not paid, the funds are transferred to the creditor. So why didn’t Jabba simply do this and watch the credits roll in?

It could be that as a struggling smuggler Han was living in his overdraft or maybe his bank balance was below the protected balance. However, the most likely explanation is that Han chose to bank in Coruscant, and banks in foreign jurisdictions frequently refuse to freeze accounts on the basis of a Scottish Court order until the court order is made enforceable by their own domestic legal processes.

If he couldn’t do that, then why didn’t Jabba just have arrested Han’s wages?

Another method of recovery frequently used in cases involving individuals is an earnings arrestment. Once a court order is obtained, Sheriff Officers serve a “charge for payment” which is effectively a written notice giving the debtor 14 days to pay the debt or face debt recovery. Once the notice period expires an arrestment can be served upon the Debtor’s employer and a proportion of their wage is paid to the creditor each month.

Unfortunately for Jabba it appears that Han Solo was a sole trader and as such it would not have been possible to employ this method of debt recovery

So, was Jabba right to freeze Han? 

There are other options which available to settle this debt, including Han filing for bankruptcy, which is a topic we will discuss in our next blog. Essentially, when creditors are faced with a debtor with little or no realisable assets it may often be better to avoid the expense and inconvenience of attempting to recover relatively minor debts or, alternatively – in the case of Han Solo simply freeze the debtor as a warning to others!

If you are considering commencing debt recovery against a debtor, we would advise you not to have them cast in carbonite (or at least not straight away). Our Dispute Resolution team (although not fluent in Wookie speak or Huttese, Jabba’s native language) would be more than happy to offer you advice on the steps that you should consider taking.

Alastair Johnston
Solicitor – Dispute Resolution
@LitigationLawyers
www.blackadders.co.uk

 

 

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