Default Notice (Or Notice Of Default)
Creditors are legally obliged to formally inform you in writing when you miss a contractual payment or are in arrears before taking legal action; this is called a Default Notice.
Don’t ignore a default notice. Read the letter carefully. It explains what is required of you, and what is likely to happen if you don’t respond or comply.
For other types of debts, for example, a contractual dispute, you may receive a Letter Before Action instead.
Am I being taken to court?
A default notice is part of the legal process, but not necessarily a statement of intent to start legal proceedings. However, they can not start legal proceedings without sending one which must allow you seven days to comply with its demands.
A default notice is a warning and should be taken seriously. When the notice asks for immediate payment, instructions are included. Ideally, if you can afford the full amount requested, pay this within the time limit to avoid potential court action. If you cannot afford to pay and you have additional debts, then you need to look for some debt advice.
When creditor issues a default notice but is unsuccessful in recovering the money, the next step is to make a Money Claim to the court who will issue you a County Court Claim form. This form details the amounts owed along with details of the creditor.
Don’t Ignore A Money Claim. Otherwise, the CCJ is awarded by default. You have 14 days to respond, extendable upon request to 28 days. You can respond to a money claim online.
Whether you respond or not, with an accepted offer of payment or not, a CCJ (County Court Judgment) is registered against you. The CCJ requests that you either pay the balance immediately or by instalments.
If this debt is for more than £5,000, they can consider petitioning to the court for your bankruptcy. Some creditors may use bankruptcy as a threat, without intending to go through with it, but if you owe a significant amount of money and have substantial assets (e.g. house, other property, car, etc.) a bankruptcy petition could be a real possibility.
Is getting default notice the same as a default on my credit record?
No. A lender issues a default notice before legal action. But this note the same as informing a credit reference agency that a debt is in default.
Your credit record can be marked as being in default even if the creditor has no intention of taking court action nor has issued a default notice. Typically a default is recorded with the credit reference agency when an account is 3-6 months in arrears.