All types of issues connected with past-due payment situations are debt problems. These problems occur when a consumer or a business debtor falls behind with their regular monetary transactions towards the creditor. In such case, the lender has the legal right to request payment from the subject of debt, hire a debt collection agency to act on their behalf and charge the second party (borrower) late-payment fees. An overdue liability usually derives either from the financial inability of the debtor to cover the debt terms (due to income decrease, i.e. job loss, unexpected expenditures, etc.), their unwillingness to repay the amount due. However, such lack of actions on the part of the debtor can be completely unintentionally- when the indebted subject forgot about their monetary obligations. No matter the reason for the outstanding payments, a consumer/corporate debtor is bound by law to complete the reimbursement in full, or court actions will take place.
Debt problem help & checklist
In every country, government help is offered for people with debt issues, like local council personal support schemes. However, not every debtor will be qualified for such help, except the indebted subject is in an emergency debt problem situation (e.g. debt issues, derived from severe health problems, student taxes, job loss, etc.).
When a past-due default situation occurs, a debtor should think about the reasons for their inability to pay. A debt problem can be affected by different causes:
- Erroneous income-to-expenses personal management, i.e. when the expenditures (including debt interest and default monthly payments) exceed debtor’s monthly income, based on their wage and other additional earnings, a debt problem is most likely to occur;
- Unneeded expenditure purchases;
- Borrowing larger amounts than needed;
If a borrower is not in a past- due payment situation yet, he can avoid such occurrence as well, using different management techniques:
- Prepare a special budget planner, including reduction of monetary outgoings, which can secure stable personal finances in future;
- Economise by abstaining from buying superfluous goods or services and cut credit card purchases;
- Calculating the exact monetary sum to be borrowed and not taking a larger debt than needed. Larger debts have higher interest and are more difficult to pay off;
The most important feature of avoiding a debt problem is the debt to be repaid at debtor’s earliest convenience. If the loan has a strict reimbursement period, a borrower should refrain from falling behind with their regular payments.
Debt problem consequences
Due to every law, state or international, when a default occurs in creditor’s financial system, a monetary loss is generated and the cash flow balance is disrupted. As each loan is followed by an official and legal contract, the debtor carries the obligation to repay the sum borrowed within the deadline mentioned in the agreement. Therefore the creditor has full rights to pursue debt payment from the consumer/business debtor. If the indebted subject has a debt problem and he ignores or neglects their liability engagement as a borrower, the lender might proceed to legal actions or even file a complaint to court. If a consumer does not bring their account up to date by settling their monetary obligations towards the creditor, the following actions may occur:
- Formal written reminders (default notices, ext. link 5), which inform the debtor about their liability and mark how much the consumer has to pay (might also include final deadline for payment, depending on the stage of the letter);
- interference of a professional DCA (Debt Collection Agency), bailiffs, debt solicitors or enforcement agents;
- Country court claims (CCC) for unpaid liabilities (the so-called small claims court) applicable for courts in Europe, Australia, Canada, UK and Wales, United States, etc. These claims only state and prove whether a borrower has liabilities towards a creditor or not;
- CCJ- Country Court Judgment, addressed from High Court, pertinent to United Kingdom, Wales and Scotland (ext. link 6). This judgment applies an order for payment by the debtor to the creditor within a determinate period of time. The document will also consist of the sum for settlement. This amount can either be the conceded and agreed sum between the two parties (creditor and debtor), or a particular monetary amount defined by court (if there is no mutual agreement for the debt sum between the two parties);
- Temporality seizure, granted by special court order. Such forcefully confiscation of debtor’s material items is carried out by special law representatives (debt collection lawyers and attorneys). This action is applicable for unsecured personal debts and also for secured loans. If the liability is a collateral debt, the item seized is usually debtor’s home, car or other estate property;
Property foreclosure, again accompanied by court order document, which is executed when there is a secured loan, followed by a real estate collateral (mortgage loan).
Used literature & External links