New rules on credit card debt: what do they mean for me?
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Find out how you can try to prevent being sent a CCJ and how the process works.
Research* conducted on our behalf found that nearly 1 in 10 Brits have received a CCJ or Court Decree in the last five years. A CCJ is a formal decision handed down by a court in England or Wales when an individual owes money and has defaulted on their repayments. In Scotland, the process is called a Court Decree and lenders make a claim through the Sheriff Court.
If you receive a CCJ it will remain on your credit file for six years, unless you are able to repay your debts in full within one month.
Having a CCJ on your credit file can seriously damage your credit score and your ability to borrow money in the future, so if you can, it is much better to try and deal with your debts before a CCJ gets issued. You shouldn’t think that a CCJ is only issued for debts running into thousands of pounds, as one in 10 of those with a CCJ that we asked has debts of £250 or less.
Open your letters
It is really important that you open letters from your lenders and don’t ignore them. One of the reasons lenders will escalate things to a County Court is because people don’t reply to their letters and don’t contact them to explain what’s going on. If you are open about your financial difficulties, lenders may be more willing to offer reduced payments or freeze interest temporarily. So, open your letters, read them and then pick up the phone to your lender.
Step 1: 14 days’ notice
Before lenders approach the County Court, they’ll send you a letter warning you that unless you pay what you owe, they will start legal action in a certain amount of days (usually at least 14). This letter is called a default notice and is usually sent when you have missed between 3 - 6 payments. The letter will also come with a copy of the Financial Conduct Authority’s default information leaflet for you to read.
Step 2: Suggested payment calculation
If lenders do escalate things to a County Court, you will be issued with a County Court Claim Form (which was previously known as a Court Summons.) You must fill out the form and send it back within 14 days. The form will ask you to detail all your income and outgoings … it is very important that you don’t just guess these figures … you need to work out these by looking at your bank statements.
The form will also ask you to state how much you feel able to pay back each month. It is vital that you are realistic. If you want to dispute how much the lender is saying you owe, you can note this down on the form.
Step 3: Court review
Once the Court receives your form, they will review the information. If they agree to your suggested payment each month, then you will receive a CCJ and details of how and when you will need to make your payments. If you manage to pay off your debt in full within 30 days your CCJ won’t stay on your credit record. Ideally, this is what you should try to do if you can.
If they feel you have underestimated how much you can afford to pay each month, you will receive a CCJ and be told what they expect you to pay each month. It’ll also include details of when and how you will need to make your payments. If you feel that the amount they are suggesting is too high you can appeal by asking them for a redetermination.
Step 4: Pay on time
It is really important that you make your CCJ payments on time. If you fail to make your planned payments, or fail to pay the full amount, your lenders may go back to Court and ask for a Warrant of Execution. This means that a Court Bailiff can turn up at your home or business and demand either full payment or goods to the value of your debt. You will have seven days’ notice. To try to stop this you can ask the Court to suspend the warrant and see if they will let you pay back what’s overdue in instalments.
Step 5: Unpaid debt
If the debt remains unpaid, the lender may ask for a Charging Order to be secured on any property you own or the Court may issue an Attachment of Earnings Order. This means that your employer will automatically deduct from your wages what is owed.
Where to get advice and support
Don’t feel like you have to deal with the situation on your own. You could get advice from a debt expert, like one at the Debt Advisory Centre, or an independent advice line, such as Money Advice Service, who will be able to provide more information on the different options available to you. They may be able to come to an agreement with your lenders to help you get back on the right track with your finances.
*OnePoll questioned a nationally representative sample of 2,000 adults aged 18 and over between 4th April and 9th April 2014, of whom 500 were Scottish residents.
by Shelley BowersBack to blog home