What Can Creditors Do If You’re In Debt?

August 24, 2018 / FAQs

If your company is in debt and you have creditors chasing you for money, you may be wondering what power they have and what steps they could take next.

Let’s take a look at the various moves creditors are allowed to make in an effort to retrieve their money.

What are the first steps creditors can take?

In the early stages, creditors may initially charge interest on late payments in a bid to encourage you to pay up before the debt spirals. However, if you’re already struggling to repay the money you owe, this is unlikely to make it any easier for you to pay.

Next, creditors may sell the debts onto a third party. This is also likely to see the amount you owe increase, as the third party will likely want to profit off your debt. If your debt is sold on, you may also find it harder to negotiate with your new creditors.

Rather than selling your debts to a third party, your creditors may seek the help of debt collection agencies. People often mistake debt collection agencies for bailiffs or enforcement officers, but their rights are different and they tend to have the same civil rights as creditors.

What legal action could creditors use against you?

If your creditors take the above steps and have no success in retrieving the debt from you, they could take legal action against you.

This could include the following:

  • County court judgements
  • Statutory demands
  • Notice of Enforcement and bailiff action
  • Winding-up petitions

What are your rights?

Although creditors have a right to demand payment from you, you have your own rights too. There are restrictions in place to protect you.

For example, your creditors can’t:

  • harass or intimidate you
  • contact you unnecessarily or during unsociable hours
  • involve your family members, neighbours or friends.

There are also rules in place to prevent debt spiralling out of control in an unethical way. For example, although your creditor is within their right to charge you interest, this must follow the terms and conditions in your original agreement.

What can you do if you’re struggling to pay the money you owe?

There are number of steps you can take, including:

  • Informal arrangements with your creditors
  • A formal arrangement with your creditors – known as a Company Voluntary Arrangement (CVA)
  • If your debts have got out of control and/or your creditors won’t agree to any kind of repayment arrangement, a Creditors’ Voluntary Liquidation (CVL) is likely to be the best option for your company

To learn more about your options and get specialist advice tailored to your circumstances, please get in touch with the team at Clarke Bell.