Debt can put someone in an embarrassing, stressful or difficult situation. It does not discriminate. It can, and does, affect everyone – unemployment, divorce, illness, bad decisions or merely an inability to manage your money.
These situations can all end in bailiffs knocking on your door. However, the worst thing you can do is try to ignore it.
Read on for everything you need to know about the debt collection process and how you can get back to financial freedom.
What is a debt collection agency?
Most of us use credit or finance schemes such as bank loans, store cards or credit cards. However, if you fall behind on your repayments then your creditor (your bank, a utility company, your phone company etc.) may pass your arrears to a debt agency.
The debt agency then takes over the handling of the case to try and find a solution or arrange a repayment scheme.
What is the debt collection process?
The creditor will often try and resolve any arrears before passing the case over to a debt agency.
The process can vary slightly. However, the overall system is as follows:
Step 1: Initial contact – a friendly reminder
If you miss a payment, you will receive an initial friendly reminder from the creditor or company you owe. They will ask you to contact them and make a payment as soon as possible.
Step 2: An overdue reminder
If you do not make contact or raise a payment, then you will receive an overdue payment reminder. Missed payments will impact your credit score and can affect your overall credit rating.
Step 3: A final notice request
Several weeks after you miss your first sum, you will receive a sternly written demand for payment.
Step 4: Direct contact from creditors
The creditors (or company you owe money to) may try contacting you via telephone, or other methods, to demand full payment.
Step 5: Default notice letter
If you still do not make a payment, then you will be issued with a formal default notice. This letter states that you have 14 days to make payment before proceedings are issued against you.
Step 6: Instruction of a debt agency
Your creditors, or the company you owe money to, may pass your debt onto a debt agency to contact you.
A debt agency will attempt to negotiate payment and communicate with you via letter, email, telephone or in-person.
Step 7: Summons process starts
If you still refuse payment or are unable to sustain a repayment plan, then you may be issued with a court summons. This will likely depend on how much you owe.
If you receive a summons, then you have 14 days from the stamp date to contact the court to resolve the matter.
Step 8: County Court Judgement (CCJ) issued
If you do not contact the court within 14 days of the date of issue, then the case may proceed as far as a County Court Judgement (CCJ).
If you receive a CCJ, then the form will notify you how much you owe and a deadline for payment.
It is always the case that, when a CCJ is issued, your original debt will be loaded with court fees and interest.
Step 9: Bailiffs instructed
If you have failed to adhere to the instructions on the CCJ, then the courts could instruct bailiffs to visit your property. The bailiffs are entitled to remove goods to the value of your debt or recover money to the same amount.
You should note that every visit or contact made by the bailiffs will result in additional charges and interest accruing.
How long does the debt recovery process take?
In general, the timescale between missing your first payment and bailiffs knocking on your door can be more than six months.
You will be offered countless opportunities to resolve the debt and pay any outstanding money during this time. If you are unable to make a repayment in full, then a payment plan will also always be an option.
Some debt or credit agencies also offer discount or negotiable rates for global payment.
We always recommend corresponding in full – regardless of how far the process has gone. Keeping the lines of communication open can prevent the debt from escalating further.
How can I avoid this happening?
Life is busy and stressful at the best of times. Missed payments can happen! If you receive a reminder letter, do not shy away, or feel embarrassed.
If you feel that your finances are spiralling out of control, then speak to a financial expert or the Citizens Advice Bureau. They could help you get your debts back in order.
- Sit down and review your incomings and outgoings. Set up a budget if you can, so you know you can make payments when they are due.
- Take stock of when bills are scheduled, how much you owe and whether you can afford them.
- If you know you cannot make a payment, then reach out and make contact with the creditor or company you owe. Explain your position and negotiate an arrangement.
- See if you can make cutbacks in your lifestyle on luxuries and non-essentials. Small savings here and there can add up in the long run. Where possible, always try and live within your means.
- Avoid paying your debt by using other credit schemes or loan companies. Extortionate interest fees and owing yet more money will dig you a deeper hole in the long-term.
The stress of money worries can make you want to bury your head in the sand. However, the only way to resolve them is to take proactive action.
Speaking to an expert is your way of getting out of the red! A professional can give advice and guidance on how to manage your money, consolidate debts where necessary, and even negotiate with debt companies.
If you find yourself amid financial turmoil, being harangued by bailiffs or even in receipt of a county court summons – then contact one of our debt and debt recovery solicitors today.
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