Default Notice

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I have received a default notice with threats of bankruptcy and county court judgments. What does this mean and what can I do about it?

If you have taken a personal loan or credit card in the UK, it should be regulated by the Consumer Credit Act 2006. If the payments are in arrears the creditor must issue a default notice before legal action can be commenced. You can find out if your agreement is regulated by looking at the agreement itself or phoning the creditor and asking them. The default notice should state:

The default notice must allow you at least 7 days to comply with the action required. A default notice does not necessarily mean that the creditor intends to take you to court, especially if it is complied with. If the default notice is asking for payment, it will include instructions. If the re-scheduled amounts can be afforded, then these should be paid before court action begins. Alternatively, you should seek advice (if you have other debts as well) and make a pro-rata offer to all your creditors.

The lender can start court action for recovery of the money after complying with the requirement to send a default notice, by issuing a claim form. Early communication with the lender to establish some mutually acceptable agreement can often prevent this happening. Court action will result in the registering of County Court Judgment against you and the issuing of an Order by the court that the debt is repaid either immediately or by instalments.

The creditor can also consider making you bankrupt. This can only be done if the creditor is owed more than £750. Creditors have the right to join together to make the total amount up to the minimum required (although this is rare). Sometimes creditors use bankruptcy as a threat for debt repayment, and do not intend to go through with it, though others may use it when the debtor appears to have substantial assets, i.e. house, car etc. Bankruptcy threats by HM Customs & Excise or the Inland Revenue, who merged in April 2005 to form HM Revenue & Customs, must be taken very seriously.

For immediate and free debt advice please call Payplan free on 0800 917 7823 or use our Debt Calculator to submit your debt problem online.

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