Have you received scary letters from a debt collector demanding payments? These letters may threaten defaults, county court judgments (CCJs) and bailiffs taking your possessions.
Sometimes the letters are bluffing, but the number of CCJs is continuing to go up. In the first half of 2019, there were 586,765 CCJs and more than half were for less than £650.
This article covers consumer debts such as credit cards, loans, overdrafts, car finance and catalogue debts. It doesn’t apply to debts such as council tax, rent arrears, magistrates court fines (NB parking tickets are not magistrates court fines) and tax owing to HMRC – these are priority debts and you need to take action urgently.
Have you received a Claim Form from the court?
If you have already received court papers about a debt, read What To Do If You Get A Claim Form.
Here you now have to defend the court case, even if you think it should never have been started. The timescales for replying to a Claim are tight. If you miss them you will get a CCJ “by default.”
That article covers what your options are, how to complete the forms, where to send them and how to get help.
Have you received a Default Notice?
A creditor can’t take you to court unless a formal Default Notice has been issued. A Default Notice is a formal letter from your creditor informing you that unless you bring your account up to date within 14 days a Default will be made. A Default Notice won’t be issued immediately you miss a payment – creditors usually wait 3-6 months.
As soon as you miss a payment, it will be reported to Experian or the other Credit Reference Agencies. After a few months your credit record at the Credit Reference Agencies may be marked as “in default” but, confusingly, this isn’t the same as a “Default Notice”. Read What should the default date for a debt be? if you would like to know more about defaults on your credit file.
Receiving a Default Notice letter does not mean that you will definitely get a county court judgment. If you can’t pay the balance required, you can still make an offer of repayment. If this is accepted the creditor will not proceed to court action.
Have you received a Letter Before Claim?
Creditors have to send you a Letter Before Claim before they start going to court. This gives you a chance to ask for more information and take debt advice before court. There is a lot of legal protection for consumers with old debts, so find out if you may have good reasons to challenge the debt. For example:
- if the debt is very old and you haven’t made payments to it or acknowledged it for over six years, the creditor may not be able to take legal action. This is a complicated area, if you think it might apply to your debt, read Statute Barred Debt and talk to National Debtline.
- if the creditor can’t produce a copy of the Consumer Credit Act Agreement for a loan or a credit card/catalogue, then they can’t win a case in court.
Read How to reply to a Letter Before Claim which explains what you should have been sent and what you can do.
It is usually a big mistake to ignore a Letter Before Claim. This is not a bluff. If you ignore it you will be getting court papers next.
It is much easier to dispute debts at this stage, by using the reply form to ask for the CCA agreement etc, then to ignore the Letter Before Claim and then have to defend a court case.
Creditors are more likely to go to court if you ignore them
The Ministry of Justice has looked at when creditors decide to go to court. Creditors told the MoJ that:
- “Debt recovery claimants would try to engage with the debtor and negotiate a settlement (including through the offer of repayment plans) before considering issuing a claim in the courts”
- “Customer profiling at the prelitigation stage ensured that claims were only issued where there was a high probability that the debtor could repay the debt (and the court costs incurred)”.
In other words, if you talk to the bank or debt collector, court action isn’t likely. There is more chance of being taken to court if you have a house or a well-paid job than if you are unemployed.
Sending a bailiff round
Unless you already have a County Court Judgment, this is a bluff! For consumer debts, a bailiff can only be sent round if
- the creditor has obtained a CCJ
- you don’t comply with the terms of the CCJ.
If you get panicked by letters and court forms and try to ignore them, then bailiffs could be the end result. But if you try to deal with your creditors and any Claim Forms you receive, you shouldn’t need to worry about bailiffs.
What you need to do
Even though the threats in the debt collector letters may well be bluffs, it’s not safe to ignore them. To avoid the escalation from late payments to CCJs and bailiffs, you need to make an offer of a monthly payment to your creditor – ignore the fact that the letter is demanding immediate payments in full, contact your creditor and make a realistic offer.
The more you talk and the more co-operative you are, the less likely court action will be taken. Legally you don’t have to explain to your creditor why you have missed a couple of months payments, nor supply them with details of your income and expenditure – but if you do, then you are more likely to be able to negotiate a repayment plan.
It’s important that you don’t promise creditors more than you can afford. And if you have more than one creditor, they all need to be treated fairly. If you promise all your spare income to the first debt collector that calls you, what are you going to say to the next one?
Unless your difficulty is very temporary, just a couple of weeks, you need to think through your whole debt situation:
- read up about your debt options and priority debts. If in doubt, a Debt Management Plan or making token offers of payments are often sensible holding moves;
- don’t let cross phone calls or scary letters rush you into something you aren’t certain about;
- don’t stop paying priority debts such as your rent or council tax because a bank or debt collector is threatening a county court judgment – that will cause much bigger problems in future;
- don’t ignore a Letter Before Claim – replying asking for more information. This may prove that the creditor can’t win their case and it will help you decide what to do.
If you are still worried or uncertain
StepChange are a great source of advice on how to deal with your creditors. They can help you look at whether a debt management plan is a good option for you, or what your other alternatives are.
If you get a Letter before Claim or a Claim Form itself, then talk to National Debtline on 0808 808 4000 asap. Even if you don’t think you have a defence or you don’t have any money, it is still better to take advice as you may be able to offer a very low monthly payment which the court will agree to.