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How to halt debt collection a guide for British individuals
In the same way as there are many reasons for a business to pursue an outstanding or late payment, there are equally as many reasons why a debtor may not pay. Creditors have the right to send debt collection letters for an overdue invoice owed by a commercial client, an individual or a business partner. Following the receipt of a debt collection letter, it is important that the debtor understands their rights in respect of payment and recognises what their next steps are to enable a satisfactory conclusion of the dispute for both parties.
This guide will explore how debtors can halt a debt collection procedure, including helpful insights into the process and when to seek legal action.
Click on the links below to jump to that section:
Find out when a debt collection letter is sent, and what will happen to the debtor.
The rights of the debtor, and what they should be aware of.
Discover the different debt collection practices for a debtor.
Find out what debtors should consider after receiving a Letter Before Action (LBA).
Read the most common queries on debt collection in England and Wales.
What happens after receiving a debt collection letter?
A letter highlighting an outstanding debt signals that a creditor might be initiating the debt collection process. Typically, this means that previous attempts to collect the debt through standard billing procedures have been unsuccessful, leading the creditor to escalate the matter. If financially feasible, the most straightforward resolution to this situation is to repay the sum owed as soon as the first debt reminder is delivered. However, immediate repayment is not always an option.
Debt collection is a structured process, and understanding the regulations can provide you with the necessary tools to manage the situation. Upon receiving a the deadline for payment. Failing to resolve the debt may lead to further actions, including legal proceedings.
What are the debtor's rights during the debt recovery process?
A debtor is protected under the law of England and Wales under the Consumer Credit Act 1974, which stipulates that a creditor must send you a default notice before they take any legal action through the courts. This notice is a formal declaration of a breach of the credit agreement, giving you a chance to remedy the situation.
Additionally, the Financial Conduct Authority (FCA) lays down specific guidelines and regulations that creditors must follow during the debt collection process. These regulations are designed to prevent unfair collection practices and to ensure that creditors and collection agencies treat debtors fairly and respectfully. It is your right to be informed of these regulations and to report any behaviour that contradicts them.
How can a debtor halt or pause an outstanding debt payment?
There are several legal avenues through which a debtor can halt or pause an outstanding debt payment. Understanding each can provide crucial breathing space or even lead to a resolution:
Limitation period: In the UK, the statute of limitations for most debts is six years, after which a creditor cannot enforce the debt through the courts. This period is counted from the date of the last payment or acknowledgement of the debt. However, this is not a viable option, as ignoring the debt may lead to more aggressive tactics and eventual legal action.
Disputing the debt: If you believe the debt claimed is incorrect, unfairly inflated, or fraudulently attributed to you, you have the right to dispute it. Initiating a dispute requires contacting the creditor with evidence supporting your claim, which will pause any collection efforts until the dispute is resolved.
Contacting the creditor: Engaging directly with your creditor can sometimes result in arranging a more manageable repayment plan or temporary forbearance. This may include creating a management payment plan rather than demanding payment in one large sum.
Debt respite scheme: Known also as "the breathing space" scheme, this scheme allows eligible individuals to freeze interest, fees, and enforcement actions for up to 60 days while they seek advice and solutions to their debt problems.
How can debtors settle their debt with creditors?
Settling a debt often requires negotiation and strategic thinking, encompassing viable strategies to achieve a resolution. One common approach is making a full and final settlement offer, where you propose a one-time payment that is less than the total amount owed. In exchange, the creditor agrees to write off the remainder of the debt. If accepted, this arrangement legally binds both parties to the new agreement.
Debtors over 55 may want to consider utilising a pension fund, which uses money from their pension to help settle the debt. However, this may cause long-term financial issues, and debtors should never feel pressured to use this fund.
Alternatively, Alternative Dispute Resolution (ADR) can be employed, including mediation or arbitration. Such methods involves the appointment of a third-party mediator or arbitrator who assists in negotiating a fair settlement between you and the creditor. Opting for ADR can offer a more cost-effective alternative to traditional court proceedings.
sytong Read our expert guide on the different ADR options available here for more information.
Expert legal advice is paramount throughout these processes. Debt collection lawyers specialise in these matters and provide guidance tailored to your specific circumstances.
Giambrone & Partners' team of litigation and dispute resolution lawyers represent both individuals and organisations. Our ADR lawyers have a successful track record of using negotiation skills to settle disputes, avoiding lengthy court proceedings.
Contact Giambrone & Partners today for more information on debt advice, or to request a callback with one of our lawyers.
Frequently asked questions
What should you do if you believe a debt collector has violated the law?
If you believe that a debt collector has violated the law, you should document all interactions and gather evidence of any misconduct. You can lodge a formal complaint with the Financial Conduct Authority (FCA)
Additionally, seeking legal advice from a lawyer specialising in debt law can be crucial to understanding your rights and exploring potential legal actions you might take.