Can debt collectors take you to court? Claims and your response

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.

This guide explains court claims and judgments in England and Wales. Scotland and Northern Ireland have different procedures. See related guidance.

What Can Be The Reason for Court Action? 

A collector may act for the creditor or may own a purchased debt. A claimant needs the legal right to bring the claim; a collection letter alone does not establish that right.

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.

A creditor should follow the applicable pre-action and regulatory requirements. Efforts to agree repayment can help, but there is no universal rule requiring it to accept the particular payment plan you propose.

The required pre-action steps depend on the debt. The Debt Claims Protocol usually gives an individual at least 30 days to reply to a business’s letter of claim. A Consumer Credit Act default notice is a separate requirement for specified enforcement steps on relevant regulated agreements, not a universal letter sent after every letter of claim.

A default notice, a letter of claim and a court claim form serve different purposes. Check what document you have received and its deadline. See related guidance.

» TAKE ACTION NOW: Fill out the short debt form

What should I do if I receive a claim form or judgment?

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. 

A claim form starts court proceedings; it is not already a judgment. Follow the response route and deadline on the papers. Under the usual England-and-Wales procedure, a defence is due 14 days after service of the particulars, or 28 days if a timely acknowledgement of service is filed; exceptions and digital procedures can apply.

If judgment has already been entered, defending the original claim is no longer the same step. Seek advice promptly about any set-aside, appeal, variation or enforcement issue. See related guidance.

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. 

Your response depends on whether this is a new claim or an existing judgment:

Accepting It 

If you admit a claim, follow the admission procedure and provide accurate financial information if requesting time to pay. Get advice if you dispute any part; do not admit it merely because the creditor demands payment.

The claimant may accept proposed instalments. If the payment terms are disputed, the court can determine them under the applicable procedure.

The creditor does not have total control over the court’s decision. An affordable proposal should be supported by an accurate budget.

Suggesting Changes in the Terms

If an existing judgment is unaffordable, ask a debt adviser or the court about redetermination or variation. The correct route and deadline depend on how the judgment was made.

Form N245 is commonly used to ask to vary County Court judgment payments or suspend a warrant. N244 is a general application form, including for many set-aside applications; inability to pay alone does not make it the correct set-aside route.

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. 

For a payment variation, follow the applicable form and procedure and provide income, spending, assets and debts. A fee or Help with Fees may be relevant.

A proposed instalment amount is not automatically accepted. Do not assume that submitting an application alone stops all enforcement.

Disputing a claim or applying to set aside a judgment

For a default judgment, CPR 13.2 requires a set-aside where judgment was wrongly entered. Under CPR 13.3 the court may set it aside where there is a real prospect of successfully defending the claim or another good reason; promptness matters. A set-aside normally reopens the claim rather than cancelling the underlying debt.

An alleged breach of FCA rules does not automatically make a court claim void. Identify any legal defence or procedural ground and obtain advice; a complaint and a court response may both be needed. See related guidance.

What is a Default Notice? 

For certain regulated credit agreements, a default notice is required before specified enforcement steps, such as demanding early repayment after breach.

It should identify the breach and the action required to remedy it. It is different from a credit-file default entry and from a court claim.

The statutory remedy period is generally at least 14 days after service of a compliant notice. Check the actual document and obtain advice if the dates or requirements appear wrong.

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.

A credit-file default can make borrowing harder or more expensive, but it does not make every credit application impossible.

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. 

Court proceedings still require the appropriate process and a legally enforceable claim. An unresolved default notice does not itself amount to judgment.

What is a Claim Form?

A claim form is issued through the court and sets out a claim against the defendant. It means proceedings have begun, not merely that a collector is considering them.

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. 

Respond using the route and deadline specified by the court. Seek advice promptly about admitting, partly admitting or defending the claim, and any request for more time.

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.

The court determines the claim if it continues. A judgment is not automatic merely because negotiations fail.

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.

Some debt collection businesses act for creditors; others purchase debts. Check the letter and ask who owns the debt and how the balance was calculated.

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.