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.