If you as an individual or your company has any level of debt, you will also have creditors; the parties who are owed a portion of the debt. If you’ve not paid back what you owe, then depending on the amount of debt and how long it’s been due, your creditors can pursue various legal action to recover it.

Increased interest on your debts

If you’ve applied for a loan or finance, you’ll be expected to pay a set amount back each month. The overall amount will usually have interest added, so unless your APR (Annualised Percentage Rate) is zero, you’ll end up paying back more than you borrowed. If you fail to make repayments, you could also have to pay additional fines. Although creditors can’t increase their interest rates because of missed payments, they can add extra charges if you do miss them.

Depending on whether the loan’s terms include any personal guarantees or debentures, these will bypass any limited liability protection in the company or partnership, and the debt could affect your own finances.

Send debt collectors

Creditors can hire debt collectors; they will visit the debtor’s premises and attempt to reclaim the monies owed to them. Debt collectors work for agencies and are often used as a tactic to persuade, and sometimes intimidate debtors into paying.

It is important to note that debt collectors are NOT acting on a court’s behalf, and therefore, don’t have the same powers as bailiffs or High Court Enforcement Officers, so they are not allowed to seize assets worth the debt’s value. Debt collectors should also give reasonable notice before they visit a debtor; they don’t have the right to enter premises and cannot force entry in any circumstances.

File a County Court Judgement (CCJ)

Your creditors can file a County Court Judgement (CCJ) against you as an individual, or your company depending on the type of debt owed. As the name suggests, it must be approved by a court, who must agree you owe the creditor the specified amount. A CCJ will detail the amount owed, who it is to be paid to, the deadline, and details of the available payment options; whether the full amount is required immediately, or whether you can pay in instalments. You will usually have up to 30 days after the issuing of the CCJ to repay it. You should never ignore a CCJ, and while it can’t force you to repay the debt, it can lead to creditors resorting to further debt recovery action.

Send in bailiffs

If your creditor feels you have assets sizable enough to repay your debt, they may send bailiffs to your home or place of business. Bailiffs will attempt to recover assets of equal value to the amount of debt owed. Creditors often resort to using bailiffs after reminders and CCJs have failed.

What bailiffs can and can’t do is dependent on the type of debt you owe, and what kind of bailiff the creditors send. For example, only those operating on behalf of the courts (High Court Enforcement Officers) can enter company premises, and their powers to enter your home are still restricted. Bailiffs aren’t allowed to take assets higher in value than the debt owed, nor can they take essential items that a business would rely on to continue trading.

Issue a statutory demand

If you owe money to a creditor, they can send you a statutory demand in writing. This demand will inform you that if you don’t take steps to repay what you owe, they will attempt to make you bankrupt. Statutory demands are issued after previous attempts to collect the debt have failed and are among the more severe forms of creditor action.

You can challenge the statutory demand by applying to the court to have it cancelled or set aside if you don’t think you owe the amount specified. You should never ignore a statutory demand, as your creditor could apply to make you bankrupt, or wind up your company (if the debt is company-related) if you don’t challenge or attempt to repay the debt.

Summary

Creditors may chase you for payment of any unpaid debts through a variety of methods. These methods could include increasing interest on debts you do have or issuing a court order. They can also send debt collectors, or even bailiffs to your premises to recover assets equal to the debt’s value. Whatever action creditors take against you, don’t ignore it, take the necessary action to pay off the debt as soon as possible to avoid further, and more damaging creditor action. Similarly, if you proceed with any of the previously mentioned legal action against a client, they could be insolvent. If this is the case, an insolvency practitioner acting on their behalf will contact you and detail any recovery arrangements they are entering to pay creditors back.