Unsecured debts
These are most commonly personal loans, credit and store cards, and payday loans.
These debts are unsecured. Court orders can be used to enforce payment, but there is more risk of a loss than if the debt was secured on an asset. If you to become insolvent, creditors would only get some, or in some cases, none of their money back.
The only assurance the lender has that you will repay an unsecured loan is your creditworthiness and your word.
I can’t afford my unsecured debts
You should contact your creditors to try to reach an agreement if you’re having problems making repayments.
An unsecured creditor cannot seize an asset to get their money – so often are more aggressive in their approach to arrears compared to secured creditors.
The law says unsecured debts are not priority debts. With priority debts non-payment has more severe consequences, for example, your mortgage or council tax arrears.
Creditor Action
Solicitor Letters
While letters from solicitors should be taken seriously – they often just a collection tactic from your creditors.
Final Demand
Not a statutory notification, but it is a general expected before legal action can be taken, giving typically 7-14 days notice.
Default Notice
Creditors must advise you formally in writing that you have missed a contractual payment or are in arrears with an account before taking legal action; this is called a default notice.
Home visits from debt collectors
A debt collection agent at your door should not be confused with a Bailiff acting in an official capacity.
Statutory Demands
A Statutory Demand is a legal notice from a creditor giving 21 days to settle a debt otherwise bankruptcy proceedings may follow.
County Court Judgment (CCJ)
A creditor can apply for a Court order to help enforce payment of a debt in arrears.
Charging Order
A charging order works by securing an unsecured debt against your property or other assets.
Order to Obtain Information
Creditors can apply for a court order to question you under oath about your financial situation.
Warrant of Control
This authorises a county court bailiff to try to take control of your possessions to be sold at auction to pay the debt.
Attachment of Earnings
This instructs your employer to pay some of your wages directly to the Court.
3rd Party Debt Order
This allows a creditor to get the money you owe them directly from your bank or whoever is holding your money for you.
My partner and I share a credit card
Credit cards are never issued in joint names.
The credit agreement is with a primary cardholder, who may have requested an additional card for their spouse/partner. Any additional cardholder simply gets the facility to spend on the primary card holder’s credit. All debts are in the primary cardholder’s name. It does not matter which card is used.
When an unsecured debt becomes secured
If you have an unsecured loan and a lender already has a court order in place to enforce payment, they can apply to the court to get a charging order over your property. This means the debt has become a secured one.
Unsecured debts in an IVA
In an IVA, unsecured debts from personal borrowing are including as a creditor
In the context of an IVA, debts are referred to as either an expenditure item or included as a creditor.
An expenditure item
When entering into an IVA, a calculation is made to determine your available disposable income. This establishes how to much you to have to pay towards your non-priority debts once you've paid for your living expenses, important obligations and priority debts. Your available disposable income is how much you pay into the IVA.
So, priority debts and other important obligations are said to be excluded from an IVA but are an expenditure item used to determine the IVA payments.
Included as a creditor
A creditor in an IVA represents a negotiable debt. It is these debts which are said to be included as a creditor in the IVA and cleared once the IVA completes.