The following is a collection of questions that have frequently been asked about debt and what to expect.
Is my credit rating going to be affected?
Yes. Whilst you are repaying your debt you will most probably not be able to borrow more money from any lender who uses credit checking before lending money. A note will be put on your file informing lenders that you have unpaid debts and this may prevent them from wanting to lend you more money.
I am Being Threatened With Court Action – What Can I do?
If you are struggling to repay your debt and a creditor feels that you are not making a reasonable effort to repay, they may ask the local County Court to become involved. The Court will review your circumstances and make a judgment about how much you are able to repay your creditor (normally on a monthly basis). Most creditors will not pursue this action until they believe there is no other way to make arrangement of repayment with you.
If you are threatened with court action, do not panic! Always take advice about making a sensible offer of repayment. If you have already been issued with a County Court Judgment (CCJ) and believe that it is unreasonable, again take advice. It may be possible to reduce the amount you are being asked to pay.
Get free advice in a face to face meeting
Arrange for a debt consultant to visit you for free and explain the options.
Property repossession can only ever occur if you do not maintain your mortgage payments or any payments on loans which are specifically secured against your property. For this reason it is vital that you maintain your mortgage and secured loan payments over and above any other debts.
If you have started to miss mortgage or secured loan payments, do not panic. Property repossession does not happen overnight. However, you should obtain advise as soon as possible.
Will I be able to get a mortgage or credit in the future?
Yes – there are companies who will even lend you money whilst you are in debt, however this is normally not advised and must be carefully considered. Once your debts are cleared, you will then have the freedom to borrow again as normal.
Do many people get into debt?
Yes. Surprisingly, hundreds of thousands of people in the UK today have debt problems that they cannot support, for many different reasons. Look here for some other people’s debt stories.
This will depend on how much you owe and the solution you use to manage the problem. If you are involving a 3rd party for help, i.e. a Debt Management Company, always ask how long will it take to be free of the debt.
Will bailiffs come to my door?
It is possible bailiffs will come to your door if you ignore the problem and a visit is the only way to make contact with you. If you take proper advice and get help then there is no reason for it to get to this stage.
Who needs to know that I am in debt?
Debt is a private matter between you and your creditors unless you take the bankruptcy option. Otherwise, in general you are under no obligation to tell anyone other than your advisor and the creditors themselves.
How long will it be before I can borrow more money if my credit file is affected?
With unsecured lending e.g credit cards and loans etc, you will not be able to borrow until the original debt or agreed amount is paid in full.
With secured lending e.g mortgages, car H.P agreements etc, you may be able to borrow on this basis but it is not always advised. It is advisable however if it is part of a debt repayment plan (i.e re-mortgaging your house to realise some equity to repay your debts)
What action can creditors take against me?
Firstly creditors will write to you and/or telephone you demanding payment. (They may charge you for late payments and administration fees). They may also freeze your account in debt (bank, catalogues, store-cards etc) so that you cannot use it anymore.
If you have not paid after being chased, then they may issue a default notice.
If you still haven’t paid then they may involve an external debt collection agency. The debt collection agency will write and/or call you to chase the debt and they may charge you for this. They may threaten you that your credit file will be affected and they may also threaten to take you to court.
If after this you haven’t paid then your account may be passed to a solicitor who will also chase you to pay the debt. The solicitor may then initiate proceedings to issue a County Court Judgement against you.
If you still haven’t paid after the issue of a CCJ then the court could contact your employer and get an “Attachment of Earnings” order, which will deduct payments directly from your wages. You can appeal if this deduction is too high – details of how to appeal will be provided with your notification from the court.
Could I lose my job for being in debt?
Normally no, but there are some employers who include a clause in their employment contracts referring to personal debt (this is typically in the financial services sector). Check your own Contract of Employment to see if any such clause appears in yours.
Will I go To Prison for being in Debt?
No. Under normal circumstances, you will not go to prison because of debt. The problems of debt are dealt with under Civil Law. This means that the creditor who is owed money may be able to levee financial penalties onto the debtor e.g. increased interest charges. However, the penalty of a prison sentence can not be applied.
There have been a few instances in the past where individuals have avoided the payment of Crown Debt such as Poll Tax Payments and Income Tax evasion with criminal intent. In these instances, prison sentences can be issued by the court.