There are different ways to collect unpaid debts. The time your creditor can take, their act, their attitude and how they contact you, and the further action they might take, all differ.
This means we can’t tell you exactly what will happen, and when, if you fall into arrears, but we can give a general idea of what to expect.
The missed payments will be recorded on your credit file so you’ll find it harder to get credit. If you can pay off your missed payment within one month or two, you may be able to avoid getting default notice on your credit report.
What “can” creditors and debt collection agencies do?
They can chase and demand you to pay off your debts
A debt collection agency can chase you for the debt by phone or letters. There are rules they have to follow as debt collection procedure is now a regulated activity under FCA rules.
Doorstep Debt Collectors
Some creditors do send local field debt collectors to chase debt repayment and demand their debt-money face to face. These field collectors are not Bailiff and are not there to enforce a court order as bailiff does.
It’s not normal that a lender uses doorstep debt collectors as it’s cheaper and more effective for them to call you and send you a debt recovery demand letter. HMRC is a prominent creditor who does send their local debt collectors to chase their tax payments.
Add Interest and Charges
Your creditors, and the debt collection agencies acting on their behalf, can continue to add interest and charges to your account in line with the original agreement. This helps them in increasing the overall debt liability and to use funds to collect a debt from you.
Take money from connected accounts
If you have a current bank account with the same bank with whom you also have credit card unpaid debt, the bank may take money out to fund your credit card debt.
They don’t need permission from you, but they do need to warn you. This is called the “bank’s right of offset”.
Your creditor can issue – a default notice
These are usually sent by the creditor after 3-6 missed payments, and serve as a warning that your account is about to default.
The default is usually granted if you don’t bring it up to date within two weeks. It’ll appear on your credit file for six years and will make it harder to get credit for that time.
They can pass the debt on to a – debt collection company
Also known as debt recovery agencies, they don’t have any more legal powers than the creditor, but they may be more persistent in contacting you.
They can apply for a court order
If you receive any court forms you must fill them in and make an offer of repayment. The court will set a repayment and it’s important that you stick to this, or the creditor can take further action. Once there is a court order against you, your creditor may enforce the debt by Bailiff action debt recovery. These will involve attachment of earnings order if you are employed, charging order to secure your unsecured debt and application to make you bankrupt.
They could issue a “statutory demand to make you bankrupt”
This is the first step they can take towards applying to make you bankrupt. And it is only possible with debts over £5,000 and fortunately isn’t very common.
Debt Collections – Missing Monthly payment and its implications
Stage 1: Missing one or two payments to a debt
Your creditors will start with reminders by phone or in writing, asking you to make up any missed payments and bring your account up to date. The approach from your creditors may be sympathetic at this stage. They may ask you about your situation and if anything has changed which makes it hard to pay.
Stage 2: Missing three or four payments to a debt
Your creditors may be putting more pressure on you by now, and you may find the tone of their letters or calls becomes firmer. They may start to threaten further action. You’ll probably find many creditors are still keen to point you towards a debt advice agency for help. If you’ve not already had advice, get in touch with us.
If your account is regulated by the – Consumer Credit Act, you can probably expect a default notice soon, and shortly after that, your account will default. This will have a big “impact on your credit file” and make it a lot harder to get further credit.
You’re probably getting to a point now where your accounts will be closed and further action is starting. Your creditors are likely to pass your debts to collection agencies too. So, you may start getting contact from new companies.
Stage 3: Missing five or six payments to a debt
By now you’ll have had a lot of letters, phone calls and other contacts from creditors.
Any regulated debts you have, such as credit or store cards, personal loans, payday loans, hire purchase, catalogues or overdrafts, are likely to have defaulted by now. These creditors may have taken some further action by this stage
The most common action after an account has defaulted is for a creditor to pass it to a specialist debt collection agency. This has probably happened by now.
Other more serious actions could have happened or could be coming soon. For example, some creditors may be considering taking your debt to court and applying for a “CCJ” (County Court judgment).
Your credit file will be seriously affected by now, but that shouldn’t be your main priority. If things have got to this stage, it’s important to get advice and start sorting out your debts. It’s never too late to contact us to start getting your finances back in order.
What your creditors or debt collection companies can’t do
- They can’t threaten you to pay
- They can’t lie that they have court permission to chase debt
- They can’t contact you via social media to chase and collect a debt
- They can’t break GDPR laws to contact you
- Your creditor can’t increase your debt by adding interest and charges
If you are struggling with debt collections letters, continuous and regular phone calls for debt payment demand and you are not sure what to do, please contact us for an immediate debt solution on 0203 318 0990.