Unfortunately here in the UK we abide by financial rules that will always favour the financial institutions. We are encouraged to take out unsecured loans and in return the creditor charges interest at a premium for these loans (their so called risk). We would like to think that our risk is the ability to pay back the unsecured loan in accordance with their rules.
Defaulting on a Credit Card or Loan
If at any time during the course of the loan something happens and we are not able to pay back the loan, then of course we start to fall into the Debt Trap. Even if we manage to make reduced payments to the creditor, the debt can still spiral out of control. Often the debts are passed on from one Debt Collection Agency (DCA) to another. As these debt are passed on the phone calls and the pressure becomes even greater.
Actual Creditor Risk
So we really have to ask what risk to creditor took when giving out the loan? Well first of all the loan was given to you in the form of Fractional Lending (a whole other story) the risk to the creditor is minimal. Very often loans etc are insured, bad debts can also be offset against tax, all income generators for the creditor. Debts can be sold on which is another income generator, So as you can see, very little risk to the creditor.
County Court Judgement
Now this is where the real problem lies. If you are a property owner, a creditor can issue a court summons for the outstanding amount. Once a CCJ has been issued against you, the creditor then has the right to apply to the courts for a Charge over your property. These are notoriously difficult to defend!
Biggest Debt Crime of All
I think the biggest scam or debt crime, if a debt has been sold on, the new owner of the debt can take you to court and go through the same procedure as above. They can claim for the full face value of the debt, which will be many times higher than the price they paid for it; possibly 10 pence the pound or less.
So if you are in trouble and you do own a property, then do try to keep the creditor happy.
I see a lot of Debt Help cases here in Somerset, so if you do have any questions, do get in touch with me.