Secured Loan: Unable to pay

There is a process that creditors follow in order to collect an unpaid secured loans agreements:

• They call you and send letters requesting the outstanding payments.
• The creditor may pass the debt to their own collections department who will also contact you and request payment of the arrears
• If you miss a number of payments (between three and six), the creditor may send a default notice. If you cannot pay, the secured loan agreement is then cancelled
• The creditor may then request the services of a debt collection agency to collect the arrears on their behalf
• The debt collection agency will send letters and phone calls to persuade you to pay a specified amount each month
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  If a creditor is not willing to accept your offer of payment or you cannot pay at all, they may start court action to recover the debt. If this happens you will receive a claim pack from the court. The following documents will be included:
  • A claim form telling you how much you owe, who is applying for the judgment and where to return your paperwork
  • An acknowledgment of service form for you to apply for more time to complete your paperwork
  • An admission form for you to show the court how much you can afford to pay
  • A defence form for you to complaint if you think the amount claimed is incorrect

If you do not send the complete documentation back before the deadline, the court sets the payment at the amount the creditor has requested. After the deadline, the court sends a letter to tell you how much to pay and when. This letter is called a 'Judgment for Claimant'. A county court judgment (CCJ) is registered when you receive a letter titled 'Judgment for Claimant' and will be recorded on your credit file.
This will specify a monthly instalment or ask you to pay the full amount immediately or 'forthwith'. If you make the payments, no further action should be taken. If you do not make the correct payments on time, the creditor can ask the court to enforce payment using one of the following methods:

• A warrant of execution, which means a visit from the bailiffs
• An attachment of earnings order
• A charging order. It is an order from the court that allows the creditors to place a charge on your property.
• An examination of means. Here the court asks you to attend a hearing to give evidence of your financial situation.
• A third party debt order. Here, the court takes money directly from your bank account.
• In some cases, they could enforce the debt through the high court