A default notice is a formal letter sent to you by a lender or creditor if you are in arrears with your account. Creditors and lenders are legally obliged to advise you formally in writing that you have missed payments.
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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?
A default notice is formal notification from a creditor or lender that you are in arrears. Default notices generally stay on your file for six years. It can be hard to get credit once you’re in this situation and it can impact on other areas of your life, so it’s essential to deal with it as a priority.
Default Notices will include the following information:
- The full name and address of the creditor issuing the default notice and the full name and address of the borrower
- The type of agreement and full details of how the agreement was breached
- The early settlement figure (for fixed sum only)
- Action you can take to remedy the situation and comply with the agreement
- The proposed action by the creditor if you don’t comply with the agreement
Am I protected?
If you have taken out a personal loan or credit card in the UK, it should be regulated by the Consumer Credit Act 2006. You can find out if your agreement is regulated by looking at the small print of the agreement itself or contacting the creditor.
What happens after I receive the default notice?
If the payments are in arrears the creditor must issue a default notice before any legal action or intervention can take place. As with all debt problems, it’s vital to act quickly and to seek professional advice. A default notice is a warning and as such should be taken very seriously.
The default notice will give you 14 days to comply with the action required. This doesn’t necessarily mean that you will be taken to court – and if you comply promptly with the instructions, the issue should be resolved swiftly and the creditor won’t take any further action.
If the default notice is asking for immediate payment, it will include instructions. Ideally, if you can afford the amount requested, this should be paid within the specified time limit to avoid court action. However, if you cannot afford to pay and you have additional debts, it’s sensible to make an offer to all your creditors. For free advice on how best to do this, just give us a call on 0800 280 2816
Will I have to go to court?
After sending a default notice, the lender can start the process to recover the money by issuing a claim form. If you receive a claim form, you will know that your creditor has started proceedings in the county court. This claim form will make it clear who is taking you to court, the amount of arrears and proposed action.
To avoid court action, it is advisable to contact the lender to establish a mutually acceptable agreement. Court action will result in the registering of a County Court Judgment against you and the issuing of an Order by the court that the debt is repaid either immediately or by installments. So long as the debt is for less than £25,000 you will be able to apply to the Court for a Time Order to give you more time to repay the debt.
Declaring bankruptcy – is this a solution?
For amounts in excess of £5000 the creditor or lender can also consider making you bankrupt. Be aware that creditors have the right to join together to make the total amount up to the minimum required (although this is rare). Bankruptcy threats by HM Revenue & Customs, must be taken very seriously.
PayPlan offers free advice for all debt situations and can help you find the best solution whatever the nature of the financial difficulty you face. If you’re concerned by default notices, take action now and seek advice straight away. We are here to help.
For immediate and free debt advice please call PayPlan free on 0800 280 2816 or use our Debt Help Form to submit your debt problem online.