Can Debt Collection Agencies Take You to Court? 

Having a debt collection agency on your back can be a scary thing. You may feel confused, wondering where the debt came from and if you really have to pay it. But don’t worry, you’re in the right place.

Every month, over 170,000 people visit our website for guidance on their debt problems. This article will guide you on:

• Understanding why a debt collection agency might want to take you to court.
• Learning about ‘Default Notice’ and ‘Claim Form’.
• Knowing what to do if you get a County Court Judgment (CCJ).
• Finding out how to avoid getting taken to court by a debt collection agency.
• Exploring if you can get a debt solution.

Our team understands what you’re going through. Some of us have been chased by debt collectors too, so we know how you feel, and we’re here to help.

Here’s how to deal with debt collection agencies and the UK laws for 2023.

What Can Be The Reason for Court Action? 

A debt collection agency works on behalf of your creditors to extract payment from you for your debts. If you have been unable to procure the money required to pay off your debts or have failed to produce a payment plan that your creditor is happy with, he or she may decide to sue you. The debt collection agency would be working on their behalf to bring you to court.

The reasons for court action by debt collection agencies are quite simple – they think that you owe them money and you haven’t paid it.

But they can’t immediately take you to court. The company must make a reasonable effort to give you an affordable payment scheme for you to follow.

Not only that, but they also have to warn you in advance in the form of a warning letter and give you a chance to amend your ways. 

The type of warning letter you receive can be from either your creditor or the debt collector. It can vary depending on the type of debt you have and can take many forms. From my experience, it is often a Default Notice.

» TAKE ACTION NOW: Fill out the short debt form

What Should I Do if I Receive a CCJ? 

If you happen to receive a CCJ regarding your debt to your creditor, it’s important that you don’t ignore it. Ignoring a CCJ is possibly the worst thing you can do because not only will your debts keep increasing, but it can also possibly land you in even more trouble. 

The most important thing to do when you receive a CCJ is to reply within the specified time period which is usually 14 days. During this time, you can either agree to pay the debt in full or offer an alternative repayment structure.

If you are going to dispute the debt, now is the time to do it!

You need to be transparent and communicative with your creditor.

Even if you feel you are being treated unfairly, it’s essential that you be cordial with your creditor and maintain a dialogue with them so that things don’t escalate any more than they already have. 

You have three options when you are faced with a CCJ: 

Accepting It 

As you can probably imagine, this is by far the least complicated option. If you feel that the debt is valid and you can afford to pay the money, you should definitely accept the CCJ. Make sure to fill in the admission form correctly and then proceed to pay off your debt. 

Bear in mind that there are cases where you can opt to pay back the money owed to your creditor in affordable monthly instalments. However, you must note that if you accept the CCJ, your creditor will be in total control. 

This means that whether you’ll be able to pay back your debt in instalments or not will be up to your creditor. 

Suggesting Changes in the Terms

If you are unable to pay your debt to your creditor according to the terms that they have suggested or if you are unable to pay the debt at all, then you can apply to change the terms that have been suggested by your creditor. 

If you cannot afford to pay off the debt at all, then you’re going to be using the Court Form N244. If you’re opting for this option, then you have to be as detailed and descriptive about why you are unable to pay off the debt. 

Bear in mind that you will have to produce concrete evidence as to why you cannot pay off the debt. For example, if you don’t earn enough to support yourself as well as pay off your debt then you will have to produce proof of your monthly salary as well as your monthly expenditures. 

Another example would be that if you cannot pay off a debt due to an illness, then you will have to produce medical documents and records, etc. 

If you have money that can go towards paying off your debt to your creditors but you are unable to pay them according to the terms that your creditors have proposed, then you’re going to need the Court Form N245. 

This is called an Instalment Order and again, you’re going to have to provide ample evidence as to why you cannot pay off your debt according to the terms proposed by your creditor. 

Rejecting It

The third option is to reject the CCJ entirely. This is extremely rare as you’re going to need a very significant reason as to why the CCJ should be rejected. 

One typical reason that comes up a lot is if the creditor has not followed guidelines during the claims process or if they have violated Financial Conduct Authority regulations while attempting to recover their debt from you in the past. Either of these actions would make their case void and thus, the CCJ would be rejected by the court.

Keep in mind that this does not mean that your debt has been written off. Your debt will very much still exist and your creditors can still attempt to contact you to recover their debt or send a debt collector after you.

What is a Default Notice? 

A default notice is usually what you will receive if you have not made a payment towards your credit card debt or towards a personal loan.

If you have received a default notice, this means that your creditor or the collection agency they have hired have begun the process of defaulting or cancelling your account. 

You get about two weeks after you receive the default notice to get your payments in order and amend your situation. If you are unable to do this then your account will most likely be cancelled. 

It’s very important that when you receive a default notice that you address it as soon as possible. If your account gets defaulted, it will stay in your credit file for six years.

As you can probably imagine, this will impact your credit score very negatively and you will have a lot of trouble securing any kind of credit for the next six years. 

If you lack the money to pay off your debts properly, then it’s a good idea to contact your creditor and explain your situation to them.

Try to be as sincere and transparent as possible so that they give you some leeway so you can get your financial affairs in order. 

Note that if you do not resolve the issues regarding the payment of your debt following your default notice, then your creditor or the debt collection agency has the right to issue a claim form. 

What is a Claim Form?

A claim form is an official document that is issued to the debtor by either the debtor or by a debt collector that the creditor has hired. It’s a document that serves to inform you, the debtor, the court action is being considered against you. 

The claim form has to be comprehensive, and there are some rules about including the details required for a claim form.

It has to mention who is taking you to court, for what reason, the amount of debt you owe, details about the payments that you missed and the payment plan that was agreed upon, etc. 

If you happen to receive a claim form, I suggest that the best thing for you to do would be to fill it up and return it.

However, if you feel that you are being wrongly targeted by your creditors or the debt collection agencies, then you can contact an independent charity that can advise you on what to do next. I have listed several charities at the bottom of this page. Their advisers will be able to help you for free.

If you are unable to reach a consensus with your creditor, then the next step they will take is a County Court Judgment (CCJ). 

What’s the Best Way to Avoid Court Action? 

The very best thing you can do when avoiding court action for debt is to keep to your agreed payments. This will allow you to avoid debt collection companies altogether.

But that isn’t always possible so be as transparent and communicative as possible with them. Let them know that you’re doing everything you can to pay off your debt. 

If you feel that you are unable to pay off your debts to them, then you can seek the help of an independent charity. I have listed a few at the bottom of this page. They will assess your situation and could help you set up a payment plan for your creditor.

Their advisers will also be able to help you determine which debt solution could work for you.

Can I Get A Debt Solution?

If you are struggling with your unsecured debts, you may be able to get help with a debt solution.

There are several options for debt relief available in the UK, so you will need to get some financial advice. There are a few charities listed at the bottom of this page that can help you for free.

Debt Management Plan (DMP)

A DMP is a way of paying off multiple debts with a single monthly payment.

It is an informal debt solution which means it is not legally binding. As it is not legally binding, you are not tied into the plan for a minimum number of payments or a set term.

Usually, your DMP will end when you have paid off all of your debts.

Individual Voluntary Arrangement (IVA) and Trust Deed

An IVA is a formal agreement between you and your creditors. You agree to pay a monthly sum that is shared amongst your debts, and your creditors agree not to contact you for the duration and after your IVA.

Typically, an IVA will last 5 or 6 years, and any outstanding debts are wiped off when it ends.

To be eligible, you need to demonstrate that you have disposable income every month that you can use to pay for the IVA’s monthly sum, and you must owe several thousand pounds of unsecured debt to more than one creditor.

You will need to opt for a Trust Deed in Scotland, as IVAs are unavailable.

They work in the same way as IVAs – you pay an agreed sum each month that is shared amongst your creditors, they can’t contact you, and any leftover debt at the end of your Trust Deed term is written off.

Debt Relief Order (DRO)

A DRO is a good option if you have few assets and little income.

For 12 months, you do not make any payments towards your debts. Your creditors can’t contact you during this time, and they must freeze any interest that would be added.

Your finances are then reassessed and, unless there has been an improvement in your financial situation, you may be able to write off your remaining debts.

Bankruptcy and Sequestration

Bankruptcy – or sequestration in Scotland – may be your final option for dealing with significant debts.

There is a negative image associated with bankruptcy, but it could be your only way to get a financial fresh start.

If you are in Scotland and have few assets, you may be eligible for a minimal asset process bankruptcy (MAP). This is a quicker, cheaper, and more straightforward version of sequestration.

Other Debt Collectors 

You should check for more outstanding debts that you may have with other companies or debt collectors. Here are four steps you could take: 

1. Check your credit report for other defaults 
2. Check your email and post for reminders or overdue notices
3. Check the court records for CCJs against you
4. Check your bank statements for the names of other debt collectors 

There are hundreds of debt collectors in the UK and each works with different companies to collect debts.

For example, Cabot Financial have been known to collect for the DVLA while Lowell Financial and PRA Group buy debts from various credit card companies like Barclaycard.

If you see a name on your bank statement that you don’t recognise then you can search MoneyNerd to see if they’re a debt collector.