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What is the Typical Debt Recovery Process? Quick Overview

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Scott
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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

Learn more about Scott
&
Janine
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Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Feb 6th, 2024
Could you legally write off some debt? Answer below to get started.

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This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

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What is the Typical Debt Recovery Process guide

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Are you confused by a surprise letter from a debt collector? Are you unsure about where the debt came from or if you should pay it? If you’re worried about how to afford it, you’re in the right place. Over 170,000 people visit our website each month to find information on topics just like this one, so you’re not alone.

In this article, we’ll explain:

  • The typical debt recovery process.
  • How to deal with debt collectors.
  • What happens when you get a default notice.
  • How you can legally write off some of your debt.
  • How to check for other debt collectors.

Our team understands what you’re going through, as some of us have faced debt collectors too. We know it can be scary, so we want to share our experience to help you make sense of things.

Let’s dive into your options and how you can take control of your debt.

Could you legally write off some debt?

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

What is debt recovery? 

Before we get into the specifics of the debt recovery process, let’s first look into what the term actually means. Although it seems fairly straightforward, there are some important distinctions to make. As we’ll see, there is a difference between debt collection and debt recovery, for example. 

Essentially, debt recovery is when a creditor takes further steps to reclaim money that they’re owed. Often, this means that they’ve already tried and exhausted several options to recover the debt. So, if you have a debt and haven’t paid it, it’s unlikely that the creditor will go straight to the debt recovery phase. 

If you continue to avoid repaying or contacting your creditor, they may go beyond just letters and calls as they try and recover their money. Once the debt recovery process is initiated, it can have some fairly serious consequences. However, before things reach this stage, they’ll likely take the option of debt collection instead. 

The debt collection process 

The debt collection process starts when you miss a payment on money you owe. This could be on something like a loan or credit card. Once this happens, there are several steps that a creditor might take:

Send a reminder 

When you miss a payment, the first thing your creditor will do is usually to try and contact you about the missed payment, often by phone or post. At this point, may organisations will be quite calm about the process – after all, people do sometimes forget payments are due. You may even get several such reminders for your first couple of missed payments, depending on how long/big the outstanding debt is. 

Letter before action 

In many cases, creditors will issue you what’s known as a Letter Before Action (LBA). Essentially, this is a formal request that you pay the debt within a certain time period, often around 7 days. Usually, this letter is accompanied by the threat of further court action – a company cannot make a legal claim against you without offering an LBA first. 

Debt collection agency 

In some cases, a company will pass your account over to a debt collection agency to chase. This can be either an external organisation or internal department that specialises in pursuing unpaid money. Often, companies will use this as a last resort, however others have an automatic process in place if you miss a payment. Once a debt collection agency gets involved, things can start to escalate fairly rapidly, and the debt recovery process usually begins. 

» TAKE ACTION NOW: Fill out the short debt form

The debt recovery process

Once a company has tried to collect the money that they’re owed without success, they will move onto some of the next steps of debt recovery. These can have some serious consequences if they continue to progress, so it’s worth knowing about how they work:

A default notice 

If your debt is regulated by the Consumer Credit Act and you miss several payments, you’ll likely get a default notice soon. After this is issued, your account will default unless you pay what you owe. In this case, your credit file will be negatively impacted, making it far harder to get credit in the future. 

Accounts closed

Lenders will likely stop lending you money at this point. If you have a credit or store account, the company you have it with will probably close it. Often, this is the step where businesses will send or sell your debt to a debt collection company. 

Court action 

If you continue to avoid debt collection agencies and don’t reach out to your original creditor, they may decide to take legal action against you. Usually, this happens after you ignore an LBA letter. Creditors can take you to court, seeking a CCJ (County Court Judgement) against you. Again, this can seriously impact your credit rating. 

Bailiffs

If you refuse to pay after a CCJ is issued against you, the court may send an enforcement agent (bailiff) to your home. They have the legal power to seize your belongings, including your vehicle, to cover the cost of the debts you owe. 

Further action

If you continue to avoid repaying at this point, a company can take further legal action against you. You may have to appear in court to defend why you’re not paying. In extreme circumstances, you could even face a jail sentence. 

How a debt solution could help

Some debt solutions can:

  1. Stop nasty calls from creditors
  2. Freeze interest and charges
  3. Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:


Situation

Monthly income £2,504
Monthly expenses £2,345
Total debt £32,049

Monthly debt repayments

Before £587
After £158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

Get Started

Checking for Other Debt Collectors

There are a lot of ways to get into debt. In fact, it’s not uncommon to owe money to several companies at once.

Perhaps you have a mortgage, a car loan, a couple credit cards and an item or two you bought on buy-now-pay-later schemes. It’s easy to lose track

That’s why it’s important to regularly check your credit report and bank statements to make sure you haven’t missed anything.

If a debt collector has purchased your debt, it appears on your credit report.

Some of the debt collectors you’re most likely to come across are PRA Group, Lowell and Cabot Financial

Thousands have already tackled their debt

Every day our partners, The Debt Advice Service, help people find out whether they can lower their repayments and finally tackle or write off some of their debt.

Natasha

I’d recommend this firm to anyone struggling with debt – my mind has been put to rest, all is getting sorted.

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FAQs

If all of that sounds fairly serious, try not to worry. There are plenty of solutions when it comes to managing your debt and making repayments. Below, we’ve answered some of the most popular questions people ask about the debt recovery process: 

Where can I get help?
There are several charities and organisations that provide help to those struggling with debt. StepChange is a good place to start, as is National Debtline. You can also check out Citizens Advice for information and support.
What if I can’t afford to pay?
Often, your creditors will accept a repayment plan if you organise it with them. This can include small monthly payments until the debt is paid off and can help you avoid the more serious consequences. If your debts are out of control, you can check out some of the debt options for getting help and writing off some of what you owe. An IVA or similar could be the right choice, depending on your circumstances.
What if I’m treated unfairly?
If a creditor or debt collection agency harasses you or treats you unfairly, you have a right to complain. Initially, it will have to be dealt with in-house by the company. However, if they don’t resolve the matter, you can refer it to the Financial Ombudsman Service for mediation.
Could you legally write off some debt?

Answer below to get started.

How much debt do you have?

This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.