Everyone is in debt to a certain extent, but problems arise when the amount of money you owe is more than you can pay back out of your regular income. When debts begin to mount up and get out of control, it is easy to panic and think about borrowing more money or taking on additional credit in order to deal with the immediate problem of creditors demanding their money. This is rarely the best option, and your first action should be to discuss your situation with your creditors.
The long term solution to all debt problems is to negotiate with your creditors to reach agreements for paying back what you owe (or perhaps only a proportion of it) at a rate that you can actually afford. The first step in this process is to write to your creditors to explain your situation and why you are not able to pay them what you owe right now. Millions of people are in debt and there are all sorts of reasons for this. It is nothing to be ashamed of, and it is far better to be open and honest with your creditors about the reasons for your situation. If they feel you are not being straight, they may assume you just don’t want to pay, and may not be inclined to want to reach an agreement with you. Whatever has happened in the past, and whatever tactics they have tried to get money out of you, all your dealings with your creditors now need to be rational, professional and honest.
This initial letter from you should explain your circumstances, detailing why you are now in a situation where you are unable to keep up with payments. Tell them that you seeking help to deal with the situation and that when you have made progress you will be writing to them again with a full financial statement and an offer of payment.
In this first letter you should also ask them to confirm the details of the debt, so that there is no misunderstanding about what you owe them. Ask for details of the amount you owe, any arrears, outstanding penalties or extra interest charges, whether the debt is secured or unsecured and whether there is any insurance policy attached to the debt.
Make sure you include all your creditors and check the replies you get to ensure that you agree with the information they provide about the debts. If there are additional penalties or extra interest for late payment, it is well worth contacting them to see if they will at least waive these charges and stop them building up while you try to negotiate a settlement.
The next stages in the negotiation process involve creating a Personal Financial Statement, prioritising your creditors and negotiating repayment terms. These will be dealt with in detail in separate articles.
Read a detailed step by step guide to getting out of debt on the Debt UK website.
Sunday 26 July 2009
Sunday 19 July 2009
Can A Creditor Sue Me For Unsecured Debt – Advice On Being Sued For Unsecured Debt
First of all we need to be clear about what is meant by unsecured debt. Most loans and debts will fall into one of two categories, secured or unsecured. A secured loan is secured against some asset you own, usually your home. What it means is that if you default on the loan, you can lose the asset. A mortgage is a loan secured against your house, and if you fail to keep up payments, your home can be sold to repay the debt. If you own your own home, It is generally much easier to get a secured loan, because the lender knows that even if you default on payment they can get their money back by selling your home. Loans can also be secured against other property, such as your car.
Unsecured loans or debts are basically every other type of loan or credit. Normal personal loans, credit card debts, bank overdrafts, catalogue debts, etc are all forms of unsecured debt. You will generally need to have a reasonable credit rating to get this kind of loan in the first place. This is because the lender does not have the valuable asset to fall back on, so they wants to be sure you have a good track record and the means to repay what you have borrowed.
Can A Creditor Sue Me For Unsecured Debt – The Likelihood of Legal Action
If you legitimately owe money to a company then the bottom line is that they are entitled to sue you to get it back. This would normally involve court action that could result in a court order against you ordering you to repay the money. The court would decide what you could afford and how much the repayments would need to be. Whether the company does decide to sue you is another matter, and will depend on many things. Legal advice and court action cost money, so it is unlikely that a company will want to spend a lot to recover a very small debt (though they will probably threaten it in an attempt to get you to pay up).
They will probably try to assess your situation and how likely and capable you are of repaying what you owe. If you have a steady job, own your own home and have lived in the same place for a while, they may well decide you should be able to pay and that it would be worth suing you. Alternatively, they may cut their losses and sell your debt to a collection agency for a small proportion of what you owe. Your debt will then be with the collection agency, who will do all they can to get the money from you, and may in turn take legal action themselves.
Can A Creditor Sue Me For Unsecured Debt – The Process of Being Sued
If you are about to be sued for an unsecured debt it is important to take proper legal advice. The processes of being sued for debt are very similar in the UK and the US. In the UK the creditor will make what is called a Money Only Claim through the county court. You will know this has happened if you receive notification from the court, and this will include a form which you must complete and return.
If the court finds in favour of the creditor, a County Court Judgement will be made against you. This is clearly not a good thing, but may not be as bad as you think. In practice what it means is that you will be ordered by the court to repay what you owe. The court ought to look at your circumstances in detail and come up with a repayment schedule that is based on what you can actually afford. The county court judgement will obviously show up on your credit record.
Can A Creditor Sue Me For Unsecured Debt – After Being Sued
If you are sued and a judgement is made against you, it is then particularly important to stick to the terms of what the court has ordered you to do. It really is vital that you do all you can to keep up with the repayment schedule that has been set, otherwise the possible penalties can go to a whole new level. If your circumstances change or you are not able to keep up with payments, you must tell the court straight away and see if the terms can be renegotiated. Never ignore the issue or just stop paying.
The possible consequences for not complying with the court order include having your assets taken by bailiffs or having money deducted directly from your wages (known as an Attachment of Earnings in the UK or Wage Garnishment in the US). Not complying with such an order could then lead to imprisonment.
Can A Creditor Sue Me For Unsecured Debt – Conclusions
Clearly it is preferable to take steps to deal with your debt before getting to the stage of being sued. The best starting point is always to speak to your creditors and make them aware of exactly why you are unable to keep up with repayments, and try to negotiate new terms for paying back the debt. It will never help to just stop paying and not communicate with them. Most debt problems can be dealt with in this way, and free help is available to guide you through that process.
Read more detailed advice on the author's Debt UK and US website here.
Unsecured loans or debts are basically every other type of loan or credit. Normal personal loans, credit card debts, bank overdrafts, catalogue debts, etc are all forms of unsecured debt. You will generally need to have a reasonable credit rating to get this kind of loan in the first place. This is because the lender does not have the valuable asset to fall back on, so they wants to be sure you have a good track record and the means to repay what you have borrowed.
Can A Creditor Sue Me For Unsecured Debt – The Likelihood of Legal Action
If you legitimately owe money to a company then the bottom line is that they are entitled to sue you to get it back. This would normally involve court action that could result in a court order against you ordering you to repay the money. The court would decide what you could afford and how much the repayments would need to be. Whether the company does decide to sue you is another matter, and will depend on many things. Legal advice and court action cost money, so it is unlikely that a company will want to spend a lot to recover a very small debt (though they will probably threaten it in an attempt to get you to pay up).
They will probably try to assess your situation and how likely and capable you are of repaying what you owe. If you have a steady job, own your own home and have lived in the same place for a while, they may well decide you should be able to pay and that it would be worth suing you. Alternatively, they may cut their losses and sell your debt to a collection agency for a small proportion of what you owe. Your debt will then be with the collection agency, who will do all they can to get the money from you, and may in turn take legal action themselves.
Can A Creditor Sue Me For Unsecured Debt – The Process of Being Sued
If you are about to be sued for an unsecured debt it is important to take proper legal advice. The processes of being sued for debt are very similar in the UK and the US. In the UK the creditor will make what is called a Money Only Claim through the county court. You will know this has happened if you receive notification from the court, and this will include a form which you must complete and return.
If the court finds in favour of the creditor, a County Court Judgement will be made against you. This is clearly not a good thing, but may not be as bad as you think. In practice what it means is that you will be ordered by the court to repay what you owe. The court ought to look at your circumstances in detail and come up with a repayment schedule that is based on what you can actually afford. The county court judgement will obviously show up on your credit record.
Can A Creditor Sue Me For Unsecured Debt – After Being Sued
If you are sued and a judgement is made against you, it is then particularly important to stick to the terms of what the court has ordered you to do. It really is vital that you do all you can to keep up with the repayment schedule that has been set, otherwise the possible penalties can go to a whole new level. If your circumstances change or you are not able to keep up with payments, you must tell the court straight away and see if the terms can be renegotiated. Never ignore the issue or just stop paying.
The possible consequences for not complying with the court order include having your assets taken by bailiffs or having money deducted directly from your wages (known as an Attachment of Earnings in the UK or Wage Garnishment in the US). Not complying with such an order could then lead to imprisonment.
Can A Creditor Sue Me For Unsecured Debt – Conclusions
Clearly it is preferable to take steps to deal with your debt before getting to the stage of being sued. The best starting point is always to speak to your creditors and make them aware of exactly why you are unable to keep up with repayments, and try to negotiate new terms for paying back the debt. It will never help to just stop paying and not communicate with them. Most debt problems can be dealt with in this way, and free help is available to guide you through that process.
Read more detailed advice on the author's Debt UK and US website here.
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