Are you feeling the pressure to make debt repayments you can’t currently afford?
Dealing with debt collectors can be scary, but once you’ve read this guide you’ll feel much more prepared if they turn up at the doorstep.
In fact, learning how to deal with debt collection companies can also help you avoid making payments that just put you into further financial difficulty. Instead, you can start working towards reducing your debt in a way that’s both realistic and feasible for you.
So if you’re unclear on how far a debt collector will go to reclaim money, or whether they can seize your possessions… this is the article for you.
Read on to find out how you should handle debt collectors, what your rights are, and how you can get them to stop for good.
Before we dive right in, it should be noted that most of these criteria are not completely fixed. Rather than a simple yes or no, each is considered as part of a ‘scale of approval’.
But ultimately, your creditors need to approve the IVA for it to be formalised. So the more of these criteria you can put a tick next to – the greater your chances are.
So what are they? Generally speaking, an Insolvency Practitioner (IP) will look for a client to meet the following IVA criteria:
- insolvent
- a minimum debt level of £5000
- a minimum of 2 creditors
- a regular income
- the ability to pay a minimum of £80 per month into the IVA
- an IVA should offer a higher return for your creditors than bankruptcy
- you must reside in England, Wales or N. Ireland
If you meet (at least the majority) of the criteria above, you have a good chance of being approved for an IVA.
Don’t worry if you’re unsure if you meet some of these, or if you’re not clear on what they mean. We’re going to break-down each one in turn.
So sit tight and take a look through the following. Once you can answer these 7 questions, you’ll have a good idea of whether you’re likely to qualify for an IVA…
What Are Debt Collectors?
Now you know what you’re dealing with debt-wise, let’s take a look at what exactly debt collectors are.
Debt collectors are agents employed by debt collection companies to collect unpaid debts. These debt collection companies are used by the following companies and organisations to reclaim money they’re owed:
- banks
- building societies
- utility companies
- payday loan companies
- other non-financial businesses
So if you have any of the debt types listed below, you may be contacted by a debt collection company or one of their debt collectors…
- missed credit card payments
- unpaid bank loans
- unpaid payday loans
- outstanding overdraft payments
- overdue utility payments
Debt Collectors Vs Bailiffs
Debt collectors can only visit your property to discuss repayment, and can’t actually take your possessions – it’s not within their legal power.
Whether a debt collector or bailiff is used to chase the money you owe depends on the type of debt you have. If you’ve received letters from or are currently being visited by bailiffs, we suggest that you read our full guide on dealing with bailiffs.
What Can Debt Collectors Do?
Here’s what a debt collector can legally do:
- visit your home
- speak with you about your debt
- try to set up a repayment arrangement
- directly ask you to make a payment to them
What Can’t Debt Collectors Do?
The good news is that there are a lot of things a debt collector is not legally entitled to do. Such as:
- visit or phone you excessively
- contact you during ‘unreasonable hours’
- ignore your preferences for contact i.e. you can tell them only to email or write to you, rather than phone
- visit you at work
- threaten you
- disclose your financial information to anybody else without your explicit permission
That should help to give you a broad idea of how debt collectors work. But here are some more detailed answers to common questions we hear about the work of a debt collector…
Can Debt Collectors Enter My Home?
A debt collector should only enter your home if you invite them in. They can’t:
- force their way in
- push past you
- stay if you ask them to leave
If you’re visited by a debt collector, we suggest you don’t answer the door, or directly ask them to leave.
Can Debt Collectors Take My Wages?
Although debt collectors can’t physically take your possessions (like bailiffs), there are other methods debt collection companies use to reclaim payment.
One way is through your wages. But this isn’t something that can just happen without warning. Court approval is needed and will only be granted if you’ve already had a CCJ in place for a certain time.
Plus, if you’re currently unemployed, or self-employed, then debt collection companies are not able to take your earnings.
Can Debt Collectors Take Money From My Bank Account?
This depends on who you owe money to.
Is the source of your debt a credit card or loan with the same bank that you hold your current or savings account(s) with?
If so, then yes, they may take your money without your permission.
Banks can invoke their ‘right to set-off’ and take your money to reclaim what they’re owed. That’s as long as they leave you enough to live on, although the specifics of this are quite vague.
In this situation, the best thing you can do to protect yourself in the short-term is to make sure that your current account and any associated savings are moved to a different provider. One that’s not associated with the bank you hold debts with.
If the source of debt is a mortgage, things work a little differently. While they can cut overdraft facilities and demand repayment, they can’t directly take money from your bank account.
If your debt is from another third-party person or company, not related to your bank, then no – they won’t be able to take money from your bank account without warning. This would require several court applications and is a complicated process that could take months.
Can I Be Evicted for Unpaid Debts?
But how about unsecured loans or credit card debt?
In these cases, yes, you could lose your home. That said, this is a lengthy process and requires a charging order.
So if you haven’t heard from the courts, you still have the time to reclaim control of your debts before the risk of eviction.
Could I Go to Prison Because of My Debts?
This is very unlikely. Unless you’re proven to have committed fraud, you are not at risk of imprisonment.
In fact, it’s illegal for the debt collectors to suggest that not paying will lead to criminal proceedings. If you experience this, you should contact The Financial Ombudsman Service, expressing your complaint.
Should I Pay a Debt Collector?
If you have the money to make repayments without putting yourself into a position of poverty or destitution, then yes, repaying your debts is the simplest solution.
If you do this, you’ll want to make sure you get written confirmation that your payments have been made.
But if you could repay your debts today, you probably wouldn’t be reading this post. So what should you do if you can’t pay?
What If I Can’t Pay a Debt Collector?
In the short-term, you may try to negotiate a repayment plan with the debt collectors directly. It’s possible they’ll agree to this but is not guaranteed and will depend on several factors.
So if you can’t agree to repayments, and can’t afford to clear the debt, what should you do next?
Stop Debt Collectors with an IVA
An IVA allows you to consolidate all of your different debts, requiring you to make just one monthly payment. The payment amount is based on your individual circumstances, but it would be affordable to you and could start from as low as £80 per month.
Further benefits of an IVA:
- after the fixed term is over, your remaining debt will be written off
- you won’t lose your home
- there are zero upfront fees
Of course, an IVA is not right for everybody and there are certain criteria you need to meet to qualify for an IVA. But a basic summary is that you’ll need:
- at least £5000 of unsecured debt
- owe at least two different creditors
- have a regular source of income
To take on an IVA your creditors must first approve of your proposal.
Thankfully, our advisors work directly with a huge number of different debt collection companies throughout the United Kingdom, to ensure that the IVAs of our customers are approved without issue.
Here’s an up-to-date list of debt collectors that have been known to approve IVA proposals:
Here is a recent and up-to-date list of debt collectors that have been known to approve IVA proposals: