Can Debt Collection Agencies Take You to Court?
Written by Will Lyon on 1 May 2019
Debt collection agencies work on behalf of creditors to collect a debt you’ve been unable to pay. As part of their attempts to make you pay, they may threaten court action. They have the power to do this, although only after following a certain procedure, so it’s important to understand the process and your rights within it.
What is a debt collection agency?
A debt collection agency is any company that specialises in collecting debt, usually on behalf of a creditor. This happens when communication between you and your creditor has broken down, and the creditor has had difficulty collecting the debt from you.
In some cases, debt collection agencies will buy an unpaid debt off a creditor, then use their own means to pursue it. They are within their rights to do this, as per the contract you signed with the creditor. If the debt has been passed on, the debt collection agency must contact you and inform you of any changes to the way the debt is being collected.
How and why would debt collection agencies take you to court?
Debt collection agencies may take you to court on behalf of a creditor if they have been unable to contact you in their attempts to recover a debt. Before being threatened by court action, the debt collection agency must have first sent you a warning letter. The nature of the warning letter depends on the type of debt, but the most common is a default notice.
A default notice usually stems from unpaid credit card debt or a personal loan. If you have received a default notice, a creditor or collection agency has begun the process of cancelling your account. Once you receive this notice, you will have at least two weeks to deal with any unpaid debt before your account is defaulted.
As of October 2017, the regulations regarding the process for creditors taking court action have changed.
If the debt is not resolved following a default notice, the agency can issue a claim form. A claim form serves to inform an individual that court action is being considered. The form must make clear who is considering taking you to court. Also for what reason, and the amount of arrears. If you do receive a claim form, the best thing to do is either complete and return it. Alternatively, call a debt advice company immediately to prevent further action.
The next step will be a CCJ (County Court Judgment). This is a court order made against you by a County Court in England & Wales.
I’ve received a CCJ, what happens now?
If you receive a CCJ, do not ignore it. Even if you don’t agree with the repayments, maintaining a dialogue with the creditors is vital to stop the debt from moving to the next phase.
If you’ve received a CCJ, there are several options:
How can I avoid being taken to court by a debt collection agency?
The simple way to avoid a County Court Judgment is to be prompt and communicative with your creditors. If you know that a debt against your name is accurate, and you can afford to pay it, it’s always best to do so. On the other hand, if you know you’re going to struggle, seek help. If you’re defending a claim, the court may grant you another 14 days upon asking. The worst thing you can do is bury your head in the sand.
Help via a debt solution?
Here at PayPlan, we offer a variety of debt solutions available for individuals in a range of financial difficulty. By identifying debt issues early on – spiralling credit card debts for example – you can prevent all the difficulties listed above. Furthermore, if you can settle the debt with the original creditor early on, it prevents it from ever getting in the hands of a debt collector.
Filed under Debt Facts