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If you have over extended yourself financially, either through an ill considered debt consolidation loan, through poor debt management or you're a victim of aggressive marketing you'll find yourself becoming very popular should you have difficulty making the repayments. Your creditors will start calling you to get their money back.
Credit companies will try various methods to get their hands on your money. The easiest way is to get you to pay up without taking you to court. Some of the methods employed may be considered somewhat underhand or intimidating. This article will equip you with the knowledge and the confidence to deal with your creditors when they contact you.
Before any legal action can be taken, a creditor must advise you in writing (Default Notice) that you haven't paid your debt. They must also give you a chance to bring your account up to date. The default notice must state that it is a default notice under the Consumer Credit Act 1974. It will also give you a time scale to bring your account up to date. If you meet this time scale then the creditor cannot take any further action. If you need a longer time scale you can apply to the court for a Time Order, which will give you a longer time scale to pay your debt. However, if you fail to make any payments then the creditor can take legal action against you.
This means that you can ignore any credit company representatives which pay you a visit saying they are here to collect the debt. Obviously be polite to them but if you do want to speak to them then talk to them. These reps may imply that they have the right to enter your premises, they don't. Not even an officer of the court can enter your house unless they have a correctly word warrant.
Should you be unable to pay your debts your creditors can take you to court. You'll know this when you receive a court summons or an initial writ. This will tell you who is taking the action against you, the amount outstanding and how this was calculated. It will also tell you where the action will take place and which of the following actions they will take.
This is a warning that court action will be taken unless you pay what you owe within 14 days. Before any of the foregoing actions can take place you must be receive this charge.
This is where the money you owe is taken directly from your salary or wages. The earnings arrestment is sent to your employer which compels them to deduct an amount from your wages or salary each time you receive them. This continues to happen until all the money you owe has been paid. Your employer can charge you a fee for doing this. There is a limit which can be deducted and this is dependent on when and how much you are paid.
This is where the money you owe can be taken directly from your bank account, building society or credit union. In a similar process to earnings arrestment the creditor sends the arrestment to your bank etc. Once they receive the arrestment your account is frozen. This means that you cannot withdraw any money or use it to pay any standing orders or direct debits. Your creditor then has to apply to the court to force your bank etc. to release the money. The court will then order the bank etc to pay the exact amount you owe. The costs involved in doing this may well be awarded against you. To avoid his from happening you can instruct your bank etc to pay the money to your creditor.
If a creditor has been unable to recover the money you owe them. They can request from a court an attachment order to try to arrange for the seizure and sale of some goods owned by you but held outside the living area of your home. This area includes your garage, driveway or in buildings used for business. These goods are then auctioned off to help to pay off your debts. There are limitations on what kind of goods can and can't be attached, when attachments can be carried out and how to stop goods being auctioned once they have been attached.
This allows for goods to be attached inside your home. A sheriff will only allow this form of attachment if the creditor can demonstrate they have considered other options to recover the debt ie earnings and bank arrestment have failed. An officer of the court will come to your house and value and remove non-essential goods. There are rules which dictate what they can and can't remove. Goods which cannot be removed include bedding, tables, sofas, chairs, telephones, computers, televisions, kitchen equipment and radios.
This is where all the value in your assets, including your house will be realised. An insolvency practitioner will administer your estate and return the money they have realised to your creditors, less their fees.
For further information the Scottish Government have produce a good guide called Dealing with Debt.
If you are worried about creditors taking action against you seek professional advice and assistance. Alternatively post in our debt forum where you'll receive advice from people who have been or are in a similar situation as yourself.
Written by John T
Here are some quick links for more information on debt consolidation, debt management and Protected Trust Deeds.
What is a Protected Trust Deed?
Protected Trust Deed will I lose my house
Protected Trust Deed vrs Bankruptcy
Protected Trust Deed or Debt Management
Debt Options For Those Who Live In Scotland
Time barred debts in Scotland
House repossession in Scotland
Bankruptcy in Scotland