Non-Priority Debt: Unsecured Loans and Credit Cards
Unsecured loans are when the loan you have borrowed is not secured on an asset, such as a home or car. These loans are non-priority.
Unsecured loans are when you have borrowed that is not secured on an asset, such as a home or car. For example, getting a loan for £5000 would be non-priority because you are not going to lose their home, not go to prison nor lose access to a supply of essential services such as gas or electricity. These loans are non-priority but fees and charges may be added which may impact your credit rating.
If you default in paying the loans, the creditor may sell the debt to a debt collection company and recover the debt through the County Courts and obtain a County Court Judgement (CCJ) and subsequently instruct an enforcement agent (bailiffs) or carry out an attachment of earnings order to recover the debt from your salary (if you are working).
Credit Cards - If you don't pay their credit card bill, the creditor may add fees and interest which may impact your credit rating. The debt could be passed to a debt collector, and your credit score will be negatively affected. In relation to credit cards, your lender could take you to court, potentially resulting in a County Court Judgment (CCJ) and bailiffs may be instructed to recover the debt. However, it is important to seek advice internally with a debt adviser.
The 3 Stages of Debt Recovery
Reminders: Phone calls, emails, and letters informing the debtor of the outstanding loan.
Letter Before Action: A formal letter, often required by the Pre-Action Protocol, detailing the debt amount, interest, and a deadline for payment.
Mediation: Attempts to reach a settlement before legal action.
Legal Proceedings (Court Action)
Issuing a Claim: If the debt remains unpaid, a claim is filed in the County Court.
County Court Judgment (CCJ): If the debtor does not respond or admit the debt, a CCJ is issued, making the debt legally enforceable.
Judgment in Default: If the defendant fails to acknowledge or defend the claim within the strict time limits (usually 14-28 days), a default judgment can be requested.
Enforcement
If the CCJ is ignored, the following steps can be taken to recover the assets:
Warrant of Control: Bailiffs are sent to seize goods.
Attachment of Earnings: Money is taken directly from the debtor's wages.
Charging Order: A charge is placed on the debtor’s property.
Third-Party Debt Order: Money is taken from the debtor’s bank account.
Statutory Demand/Bankruptcy: Serving a demand that can lead to insolvency proceedings.
Get help
If you need advice about your situation, we can help for free.
- Email: info@youthlegal.org.uk
- Phone: 020 3195 1906 (Mon to Fri, 10am to 6pm)
- Contact form: youthlegal.org.uk/contact-us
All our advice is free and confidential.