Many UK consumers use credit cards to pay for small and large purchases. These small pieces of plastic are more convenient to carry than cash but they also present great temptation. It is easy to run up a large credit card bill without realizing it. Many consumers are shocked when they receive their credit card statements. Some do not have the money in their bank accounts to pay all or even a substantial amount of these bills.
Working out a revised payment schedule with a credit card company is the first step in handling credit card debt. If this does not work, many people give up and stop making payments on their accounts. They figure that since credit card accounts are classified as unsecured debts, no one will repossess their assets. However, credit card providers have alternative ways to recoup their money.
Though cardholders will not face jail time for failure to pay credit card bills, there are other legal implications. Consumers sign an application when they apply for credit cards, signifying their agreement with account conditions and terms including a repayment schedule. A subsequent disclosure agreement reveals actions that the provider may take if bills go unpaid. Credit card providers consider card use to be acceptance of the account contract and failure to pay credit card bills a violation of this contract.
Credit card companies charge interest and late payment fees on account balances each month, increasing the amount owed. They also mail letters and make telephone calls to cardholders who do not pay by the indicated date. Eventually, the debt may be turned over to a collection agency, which can be relentless when pursuing payment. A credit card company or its representative collection agency may file a county court claim against the cardholder for the unpaid amount.
The debtor will receive notification of the claim via a written claim form. A debtor who ignores the claim is issued a forthwith judgment for immediate repayment of the balance due. If the debtor replies to the claim but does not make a repayment offer or presents an offer that the court and creditor do not agree with, the court make require a lump sum or installment payment.
When the creditor receives a County Court Judgment (CCJ) indicating the repayment amount but cannot afford the repayment, a redetermination can be requested within 14 days. Redetermination is not available to debtors who do not respond to county court claims. They must apply for Installment Orders to repay debt in monthly installments. If a debtor has a CCJ and owes money to multiple creditors, the court may issue an Administration Order that combines debts into a single monthly repayment.
If a borrower cannot make regular payments under and Installment or Administration order, they can request that the court change the payment amount. Asking the court to suspend the order until repayment becomes affordable for the debtor is another option. Debtors should not ignore a CCJ or these orders because this will have a detrimental effect on credit rating.