What can your creditors do when you are in Debt?

Debt, what are creditors allowed to do
Image courtesy of Stuart Miles / FreeDigitalPhotos.net

When it comes to what your creditors can do when you are in debt, there are a lot of misconceptions and conflicting information out there. In this post I look at what a creditor can and can’t do when you are in debt.

OK, so what can your creditors do when you are in Debt?

1. A creditor can take money from other accounts that are connected to that same company. So for example let’s say you have an overdraft debt with bank a, and you also have a savings account with bank a. They can use the money in your savings account and offset it against the debt in your overdraft. This is known as a right of offset.

2. They can continue to add interest and charges onto the account as per the original agreement. However this does not apply if you have a legally binding arrangement such as an IVA, a Debt Relief Order, an Administration Order or Bankruptcy.

3. They can issue a notice of default. This typically happens after 3 to 6 payments have been missed. It is a legal requirement for a creditor to send you this notice once you have defaulted on the original agreement.

4. They can send doorstep collectors. They have no more power than someone ringing you and you can simply tell them to leave. They are not bailiffs.

5. They can chase you by phone or letter for the outstanding payments owed.

6. They can apply for a County Court Judgment. Should you receive one of these it is critical that you don’t ignore it. You should fill in the paperwork and send it back.

7. They can pass on the debt to an internal or external debt collection agency. These debt collection agencies do not have any more legal powers than your original creditor.

8. They can issue a statutory demand. This is a way of enforcing bankruptcy. These are typically used as a scare tactic and it is very rare that they are ever enforced, but you never know it could happen.

What can’t a Creditor do when you are in Debt?

1. If you receive a county court judgment and you make a payment offer to the court and a judge accepts it, the creditors have to abide by it as well.

2. They are not allowed to stalk you on social media networks such as Facebook or twitter.

3. They are not allowed to break data protection laws. This means they cannot speak to your friends, family, neighbours or employer about your debt.

4. They cannot harass you. Whilst you should keep your creditors informed of your situation, you should not be contacted every hour of every day. The Office of Fair Trading has a set of guidelines for Debt Collection Agencies and you can read them here.

5. A debt collection agency might threaten you with bailiffs. However unless you have not kept up the agreed payments to a County Court Judgment, the Debt Collection Agency most likely means a doorstep collection agent. This is just another scare tactic. You can just ignore them unless these letters are from the courts or your debt is for Council Tax.

I need help with Debt

If you need help with debt then please visit the Get Debt Help section of this blog. On this page you can find links to several organisations who can help you with your debt problems. Good luck.

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