Debt-And-What-Happens-In-Court-Consumer-Debt-Help

Debt And What Happens In Court

Do you owe debt to your creditors and they are now taking you to court over it? This can make anyone extremely anxious and worried. Perhaps you think you shouldn’t be taken to court at all and there is no case to answer. Maybe it is all a big mistake. Or perhaps you are aware you owe creditors, but your situation means you just can’t pay it back right now. Here’s a brief guide on debt and what happens in court.

Table of contents:

    Debt and What Happens In Court: Your Documents

    Before it gets to court, do you remember receiving any letters from your creditors to tell you they will take action if you don’t pay your debts? Did you read the small print when you signed an agreement? Basically, you have rights before anyone takes you to court or starts a case against you. Your creditors must send you certain documents if they are considering a case, otherwise you might be able to challenge the claim.

    The first thing to do is to find out if your agreement is covered by the Consumer Credit Act. It doesn’t matter if you owe a payday loan, store card or credit card. What matters is whether or not it’s covered by the Act.

    Assuming it is covered, the person saying they will take you to court must send you the following three documents;

    1. A default notice: this include details of what payments you missed and how long you have to pay. Then after 2 weeks, they can send a letter of claim.
    2. A letter of claim means your creditor wants to start legal action. You have 30 days to reply.
    3. If you can’t reach an agreement, you will receive a claim pack from the court because your creditor is taking legal action. You have 2 weeks to respond.

    Check you have all these documents. If you are not covered by the Consumer Credit Act, then you should still receive a letter of claim and a claim pack. Or you may think that your creditor is starting legal action too quickly and you haven’t had a chance to respond. In which case, contact your local citizens advice bureau for more information.

    The Default Notice

    Normally, the first you hear about a default is when it comes through your door. This is a formal letter sent to you by a creditor. It’s also known as a default letter or notice of default. Now you have 14 days to pay the amount. Don’t ignore the letter, as it can lead to a county court judgement. The first thing to do is to contact your lender and talk through payment options. Additionally, you can seek free advice from a debt charity.

    The Letter Of Claim

    After two weeks, your creditor has the right to send you a letter of claim.

    If you respond to the letter of claim saying you are happy to pay but maybe in smaller amounts, then your creditor can choose to accept it without taking you to court. You will then receive a new letter confirming a new payment plan.

    Whereas if your creditor refuses this payment option, they will send you a claim pack.

    The Claim Pack

    When you get a claim pack, it means the creditor is refusing your offer to pay back your debts through a different method. Your creditor then asks the court to make a decision on your case which doesn’t have to involve a court hearing.

    What Is A Court Order

    If you receive a court order, it will tell you whether you need to pay the debt as well as how much and when to pay by.

    Now you have 3 options:

    • You can pay the debt and then the proceedings don’t start.
    • Maybe you can’t pay at all and you don’t have a defence, in which case, you agree to an order being made.
    • You might want to defend the action instead, in which case, you must serve replying relevant documents to the court. Maybe you don’t owe the money, but someone else does. Or perhaps the contract is not valid. Get the evidence ready.

    With this in mind, if you don’t do anything, then the judgement will probably go against you. By replying in good time, there’s always a chance that a court might rule in your favour.

    Court Room Terminology

    You may have not been in court before and you might be worried about it. Here is some useful terminology in simple wording which might help.

    • Creditor, also known as the claimant or plaintiff.
    • Debtor, (you) also known as the respondent or defendant.
    • Judgement, this is the outcome of the case
    • Enforcement order, this is the action a creditor can take if they win the case
    • Proceedings stayed. You decide to pay the debt, so no action it taken.

    Debt And What Happens In Court After A Court Judgement

    When a judgement has been made, its important that you keep up the payments. This is because your creditors can take other action to get their money back, such as using bailiffs or taking money from your salary.

    If the judgement goes in the creditor’s favour, they can also ask the court for a ‘charging order’ This means the court can secure the debt you owe against your home. In which case, your home could be at risk if you don’t keep up your repayments.

    As well as this, the judgement will stay on your credit report for 6years. So even after it’s all over, there will still be an impact on your financial situation. You might find it harder to borrow money in the future.

    Disagree With The Judgement?

    What if you don’t agree with the court judgement? In which case, you have 2 weeks to ask the court to review it. This is called a ‘redetermination’. All you have to do is write a letter to the court. There are 3 reasons you can apply for a redetermination.

    1. If you can’t afford the payments
    2. Or you admit the claim and make an offer of payment, but your creditors won’t accept it.
    3. If the court sets a payment plan without a hearing after your creditor refuses to accept your offer.

    Conclusion: Debt And What Happens in Court

    To conclude this article on debt and what happens in court, the main thing to remember is to respond to a request from your creditor as soon as possible. In the first instance, this is the default notice. It’s better to respond than to ignore the situation. Even if you are struggling with debt, there are people who can help at debt advice charities. You may need support when facing a threat of court action.

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