Types of Court Action
If you are in debt and it has come to the point of court action then you will no doubt be feeling some form of pressure. Not panicking is the best option to take; debt stress is hard enough without making yourself ill over a court appearance. In most cases the courts are not there to judge you, they are there to make a decision regarding the repayments, if any, of your debts.
Court Action and DebtThere are many different types of court action but the overall outcome will usually depend on your ability to pay your arrears. If it has come to the point of court action it usually means that a debtor has failed to make contact with their creditors or cannot repay their arrears. Court action will usually be the last resort for creditors and will normally be the final option after debt collectors have been used.
The Court ProcedureIf you receive a court summons then you may have to attend a court hearing. However, depending on the size of the debt you may be able to avoid a court hearing by postal correspondence. You will receive a claim form from the courts that will have particulars of the debt and you will need to state whether you agree or disagree with the debt.
Offering a Repayment SchemeThe best way to avoid further court action is to offer some form of repayment scheme. There will be a section on the claim form where you can state your offer of repayment. You should fill in all the relevant information asking for your financial details, and income and expenditure. If you do not fill out this section then the court will simply assume you are not prepared to make an offer and will order you to repay the whole debt immediately.
The next step will be to send back the claim form to the creditor who has applied for the court action, not the court. If the creditor accepts your repayment scheme then you will receive a court order instructing you to make the repayments to the creditor and a County Court Judgement will be recorded against you.
Non Acceptance from a CreditorIf the creditor decides not to accept your offer then it will be up to the courts to decide how much you pay. If the debt is under £50,000 then the court will decide for you without you having to appear. If the debt is above the £50,000 figure then you may have to appear for a court hearing. You can also ask the court to reconsider your original repayment order and you can also ask for a hearing in court. It will be up to the court to decide the amount you will have to pay based on your financial circumstances.
Voluntary Court ActionNot all types of court action will be brought about by creditors looking for their money. Many debtors will see court action such as bankruptcy and Individual Voluntary Arrangements as a last resort to manage their debts and become debt free. Where debts and court action are involved there is no guilty or not guilty, it is simply a way to come to the best solution for both parties.
Advantages and Disadvantages of Court ActionThere are some benefits to be had when court action is involved. You may be able to get interest frozen on debts and the monthly repayments will be ones that you can afford.
Disadvantages may include court costs added to your debts and further court action if you do not adhere to the repayment schedules. You will usually have the court judgement applied to your credit file, although this can be removed if you repay the debt in full within one month.
There are different rules and types of court action depending on the debt and the amount of the debt. The main outcome should be a viable solution for both creditors and debtors. If you have received a notification of court action then you should seek advice immediately from a financial advisor who will be able to give you information that will suit your individual case.