If you’re struggling with significant amounts of debt, it can be all too tempting to bury your head in the sand and just hope it all goes away. While you probably don’t need us to tell you this, the fact is, doing so will likely only make things worse.
Here at MoneyPlus, we understand how hard it can be to answer the door to a debt collector or even open a letter from a creditor. However, only by facing the issue head-on will you be able to regain control over your finances.
In this guide, we take a look at the consequences of ignoring your debt. This will include exploring the ramifications of turning a blind eye to both debt collectors and official county court judgments. We also look at how debt management solutions can help if you find yourself in this situation.
What happens if you ignore a debt collector?
If you’ve been struggling to pay off debt on a specific account for some time – be that a credit card, personal loan, or car finance policy – and you’ve fallen behind on your repayments, the creditor can choose to sell the debt to a debt collection agency. Although collection agencies in the UK must adhere to the same rules as regular lenders, they tend to implement collection actions more aggressively to recover debt.
For this reason, it’s never a good idea to ignore correspondence or direct contact regarding a debt you owe, whether it’s from your original creditor or a debt collection agency. If you do repeatedly ignore attempts to recover the debt, there are a number of consequences you could face. These include:
- Additional fees and interest: The amount you owe may increase as additional fees, charges, or interest are added to the debt.
- Impact on credit score: The debt may be reported to credit reference agencies, negatively affecting your credit rating. This can make it harder for you to obtain credit in the future.
- Court action: The creditor or collection agency may take legal action, which could result in a County Court Judgement (CCJ) against you. We look at this in further detail below.
- Bankruptcy: In cases of significant debt, creditors or debt collection agencies may actually petition for Bankruptcy on your behalf.
While it’s worth noting that there is actually a statute of limitations regarding debt in the UK, this rarely applies to common personal debts. Put simply, if no contact is made for six years, the debt can become ‘statute-barred’ and is therefore unenforceable. However, this is fairly unusual and does exclude certain debts like council tax and student loans.
What is a CCJ?
A CCJ (or County Court Judgment) is a type of court order legally demanding the repayment of a certain debt. Sought out by creditors and debt collection agencies, these orders are a common part of the debt collection process in the UK, as it represents a simple way for creditors to claim back money from individuals that they are entitled to through the use of legal action.
What happens if you ignore a CCJ?
If a creditor takes you to county court over an unpaid debt, the court will decide whether or not there really is a debt to pay. If they find there is an outstanding debt that has not been repaid, the court can issue a CCJ which will outline how and when this debt needs to be paid.
This could include an order for direct deductions to be made from your salary or the sale of a property (before it hits your bank account), for example. Alternatively, it can issue an order for all your active bank accounts to be frozen until the debt is paid or even warrant bailiff action involving repossession.
For this reason, it can be almost impossible to ignore a debt once a CCJ is issued. Many of the collection powers issued by the court, such as deductions from your payslip and/or property sales will simply start happening directly without you having to consent. With this in mind, the best thing to do is take professional advice and try to face the debt head-on before it gets to this stage.
How a debt management solution can help
If you’re feeling overwhelmed by debt, a professional debt management solution – such as an Individual Voluntary Arrangement (IVA) or Debt Management Plan (DMP) – could be the ideal way to take back control of your finances.
An IVA is a formal agreement between you and your creditors that is legally binding. They are designed to allow you to repay a smaller portion of your debt over a pre-agreed period of time, typically five or six years.
At the end of this term, any remaining unsecured debt that was included in the arrangement is typically written off. These solutions offer protection from legal action, and creditors are required to halt all further charges and interest, giving you some space to breathe.
A DMP, on the other hand, is an informal agreement where you – with help from a debt professional – negotiate with creditors to make reduced monthly payments. Although none of your debt is written off when you enter into a DMP, these solutions can ease financial pressure and help you become debt free in the long term.
Both solutions can provide a way to tackle your debt problem and avoid more severe consequences like CCJs or bankruptcy. This can give you the best possible chance of managing your debt without further escalation.
So what are you waiting for? Stop ignoring debt and get on the road to financial stability today. Simply visit MoneyHelper for more free expert advice, or get in touch with MoneyPlus to start your debt management journey.
