The truth about bankruptcy
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Do you know the difference between a default and a CCJ? If your lenders are chasing you for money, make sure you know the difference and how to deal with them both.
There are a lot of terms surrounding debt that can sometimes be a little confusing. But if you’re struggling with debt problems, understanding these terms is very important. It’ll help you know what situation you’re in, and how you can go about improving it. With that in mind, let’s look at what exactly defaults and CCJs are.
Is there a difference?
The short answer here is: yes, there is a big difference between the two. CCJ stands for County Court Judgement and is more serious than a default. It means that your lenders have gone further down the legal route to try and get their money back.
What is a default?
Defaulting is the official term used to describe what’s happening when you fail to keep to the repayment agreement you made with your lenders. If you missed just one payment, it’s unlikely that your lenders would see you as having defaulted. However, if you miss anything from three to six payments, most lenders would put a default on your file and consider the credit agreement that you signed to have been broken. Your lenders should not have started court action by the time that you receive this letter – it should act as a warning that they can pursue court action.
If you have officially defaulted, your lender will write to you to tell you. The letter that they send you should contain certain information, such as the terms that you’ve broken and what the lender wants you to do to get back on track. In a default letter they will normally ask for the rest of the money that you owe all in one go. However, it's obviously unlikely that you’ll be able to pay it all back in one lump sum, especially considering that you’ve already missed payments.
What should I do if I’ve received a default notice?
If you’ve received a default notice, don’t panic! It doesn’t necessarily mean that you’ll have to go to court or there’s no way to put the situation right. It’s very important to contact your lender and make them aware that you’re struggling to pay because you're in financial difficulties. You can to offer to pay the debt off in instalments based on what you know you can afford. Your lender doesn’t have to accept this offer and can choose to take the matter further by passing on the debt to a debt collector or by taking you to court. But even if this happens, you should find they are reasonable, and will want to put you in a position where you can pay back the amount you owe.
If you’re really struggling to pay anything back, or you’re not confident in speaking to your lenders yourself, you should seek professional debt help. By speaking to someone, such as one of our trained debt advisors, you’ll get advice tailored for your specific situation, and find out whether a debt solution is the best way forward for you.
What’s a CCJ?
A CCJ is a type of court order in England and Wales. The CCJ stage comes after the default stage and will not come out of the blue. If your debt is regulated under The Consumer Credit Act then your lender should have sent you a default letter – which is the warning – at least 14 days before they take court action.
The CCJ outlines exactly how much you owe, how you have to pay it back and the date by which it should be paid.
What should I do about a CCJ?
If you do receive a claim form letter telling you you’re going to be issued with a CCJ, it is vitally important that you don’t ignore it, and that you seek expert debt advice as soon as possible. It is still possible to negotiate with your lender at this point and avoid going to court.
If you don’t feel able to do the negotiation yourself, you can always ask a debt advisor to help you. Our advisors can help you find your way, all you need to do is talk to us. Get in touch using the one of the ‘contact us’ buttons on the left of the page.
If you’ve received a CCJ claim form, your options are either to offer to pay the debt off in instalments, or to defend your case, if you believe that you don’t owe the money you’re being pursued for.
At this stage, if you make an offer and the court accepts it, you will then be issued with a CCJ and this will outline how you are to pay the agreed amount. The court could reject your offer, in which case you would be issued with a CCJ for the amount that the court believes you should pay. For more information on how to prevent getting a CCJ and how the process works, click here.
So, there is a difference between getting a default and a CCJ, with a CCJ being more serious because at this point the lender has contacted the court. However, from your point of view the way to deal with them is the same. You need to contact your lenders as soon as possible to explain your situation and really try to put together an offer to pay in instalments.
It makes sense to get professional advice too, especially if you already have a CCJ or if you don’t think you can afford anything towards your debts. Although the situation can be stressful, ignoring it will only make it worse, and there’s always a way to deal with a debt, even if a lender has started court action. Make sure you contact the Debt Advisory Centre if you want to learn about the different routes out of debt and remember that there’s also lots free and impartial advice available from The Money Advice Service.
by Christine WalshBack to blog home