What happens if you miss a payment for a debt?
If you miss a payment for any sort of debt, it’s important to sort it as soon as possible. Companies will often contact you to let you know if a payment has been missed and what charges this will incur.
They might also ask if something has happened to cause you to miss a payment or try to find out if there is anything they can do to make payments easier for you.
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What happens if you are missing debt repayments regularly?
Creditors can become less understanding if you miss several payments. They may start to put pressure on you to bring the account up to date or even threaten further action.
Some companies may offer you advice on where to get help to sort out your money matters and catch up on your payments. Your account could be defaulted at this point. This is when it’s likely to be handed to a debt collection agency, bailiffs or sheriff officers.
You could also be in danger of being taken to court if a company applies for a county court judgement (CCJ). A CCJ can be collected by court bailiffs, who hold more power than debt collectors and will often use more aggressive tactics to collect a debt.
Any missed payments will be recorded on your credit file, which will make it harder for you to get credit in the future. However, if your money troubles are only short term and you can pay your arrears at an early stage, you may be able to continue paying your debts off as normal.
What are companies you owe money to entitled to do?
Chase the debt
They can either write to you or call you to explain what’s going on and to try to come to a reasonable agreement.
Send debt collectors
Debt collectors don’t have the same powers as a bailiff, but some companies will choose to use them if they think it will be a better way of collecting payment.
Increase your interest and charges
By not keeping up with payments or breaking the terms and conditions of a credit agreement, you can end up owing even more money due to charges and higher rates of interest being added to the balance.
Default the agreement
If you’ve missed up to six payments, the company you owe money to can put a default on the account that will go on your credit report and stay there for six years.
Pass the debt to a collection agency
A collection agency will be much more relentless in collecting payments, contacting you through letters and phone calls. They may even visit your home or workplace.
Apply for a county court judgement
If the courts become involved in your debt, you must fill in all paperwork that you get and make any payments they ask for. If you don’t do this, further action will be taken and can cause you more serious problems.
Issue a statutory demand
This is the first step to a company making you bankrupt. This doesn’t happen often and can only be issued on debts over £5,000.
It’s important to be aware of your rights when it comes to debt and its consequences. This helps to make sure you’re prepared enough to make the best decisions when dealing with debt collectors, sheriff officers, or bailiffs.
Find out more about what you can do in these circumstances below.
What is a debt collection agency?
If you haven’t been able to pay your debts for some time or have been sent payment notices from people you owe money to, you’ll likely start to hear from debt collectors, too.
Debt collection agencies do exactly what their name suggests: they collect debts. There are many debt collection agencies in the UK, some even specialise in specific sectors or types of debt.
They tend to work in one of two ways:
- The company you owe money to still owns the debt but will ask the debt collection agency to collect the debt on their behalf. The agency will then be paid a percentage of any money they collect.
- The company you owe money to will sell your debt to the debt collection agency for a discounted price. The debt collection agency then becomes the legal owner of the debt.
Once a debt collector takes over your debts, the company you originally took the debt out with will no longer contact you for payment. All communication will then be carried out by the debt collector, and they will chase you for the debt.
What is the debt collection process?
How quickly a debt collection agency acts, how sympathetic they are and what further action they may take will vary from company to company. Each one will have their own ways of collecting a balance, but each will often have charges for missing payments and other ways to claim what they are owed.
If you miss payments or don’t manage to fully repay a debt it will affect your credit score and reduce your ability to get credit in the future.
Is there a difference between a bailiff and a debt collector?
Bailiffs and debt collectors are used at different stages of debt and are very different.
A bailiff is appointed by a court to collect your debts. There are four kinds of bailiff; magistrate’s court, country court, sheriff court or private.
Bailiffs have the power to repossess and sell your possessions or home to repay your debts. You can find out more about their powers here.
What powers does a debt collection agency have?
Debt collectors don’t have any legal powers. They’re only able to do the same things as the company you originally took the debt out with, which means they will contact you via letters and phone calls.
They may also threaten court action or to send someone to your house. However, they are not allowed to harass you with phone calls or lie about the extent of their powers.
A debt collection agency can take legal action against you if you refuse to pay your debt by applying for a CCJ. However, this is less likely to happen if you are actively getting help with your debts and are willing to pay what you can.
Debt collector rights
Debt collectors will sometimes send you a letter stating they are sending someone out to visit your home, but they don’t have the right to force their way into your home. They also can’t demand you make a payment there and then, or take anything from you.
If you do make a payment against your debt, don’t pay in cash as this could be a scam. Instead, call the debt collection agency directly if you wish to set up a payment plan.
It can be upsetting to have debt collectors turn up at your door, but it’s important to remember that you don’t have to let them into your home or even open the door to them. They must show you ID if you do choose to let them in; if they don’t have any, you are well within your rights to refuse to speak to them.
If you believe you are being harassed by a debt collector, you should file a complaint with their company.
What to do when your debts are passed to a debt collector
Debts will usually only be passed to collection agencies if the account has had an amount overdue for some time. Each company will work differently and get debt collectors involved at different stages.
Confirm that they’re legitimate, and what debt they’re contacting you about. Then, you should aim to make contact with them as soon as possible to work out a repayment plan.
What to do if you are contacted by a debt collector
The worst thing you can do if you are contacted by a debt collector is ignore them. Doing this can increase the chances of them taking further action against you.
Once they do get in touch, you should seek debt advice as soon as possible. Make yourself a budget to work out how much you can comfortably afford to pay each month. Then, reach an agreement with the debt collection agent that works for both parties – and stick to it.
What to do if a debt collector visits your home
Debt collectors are more likely to send you letters or contact you by the phone than send an agent to your door, but it does happen.
If an agent visits your house, it’s important to remember the points below:
- You don’t have to open the door or let them in.
- They must show you their ID.
- They can’t take anything from your home – they are not a bailiff.
- If you ask them to leave, they have to do so.
You should always ask to see a debt collector’s ID to confirm they’re legitimate. Most agencies in the UK are regulated by the Financial Conduct Authority (FCA) or are members of the Credit Services Association and should have evidence to prove this.
If you’re unsure, you can contact the agency directly or visit their website to confirm if they hold a valid license.
Will debt collectors add more interest and charges to your debt?
When your debt is sold to a debt collection agency, any interest and charges are usually stopped. It’s likely they would have stopped when your account defaulted with the original creditor.
In some cases, the debt collection agency may still add interest and charges to your debt. However, they can only add these at the rates that were stated in your original credit agreement.
If the debt is still owned by the original creditor, they will probably continue to add interest and charges. This again would be at the rate you agreed to in your original contact.
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What to do if more than one agency is contacting you
There should only ever be one debt collection agency contacting you about a specific debt. If you are being contacted by more than one agency you should contact the original company to check which debt collection agency is acting on their behalf.
Sometimes, debt collection agencies may use more than one trading name. You can see if they are the same company by checking the addresses on the letters; if the addresses are similar or close then it’s most likely the same company.
If you’re dealing with debt collectors or are struggling with debt in general, contact us today. We can start to work through your debts from the moment you contact us and our advisers are trained to give you the best advice for your situation.