| Mortgages, loans and credit card debt have | | | | If a lender cannot come to an agreement with |
| brought UK consumer debt to over £1 | | | | you regarding repaying outstanding debts, |
| trillion. Yet each day, more and more people | | | | they will often pass your debt over to a debt |
| are finding themselves in financial | | | | collection agency - this will remove the debt |
| difficulty which they cannot get out of - and | | | | from their accounts receivable records. When |
| this ever-worsening situation has led to a | | | | this happens, the transaction is marked on |
| sharp rise in personal insolvencies, IVAs and | | | | your credit file and your account is placed |
| bankruptcies. | | | | in "default". In some cases, debt purchasing |
| | | | companies, such as Capquest Debt Recovery |
| Despite soaring profits, many banks and | | | | will buy the debt from the original lender - |
| financial institutions are now discovering | | | | often for a discounted price - and pursue you |
| that they might not recoup the money that | | | | for the full balance of the debt. |
| they have loaned to consumers. In efforts to | | | | |
| meet their financial outgoings, many people | | | | Since not all customer debts will be |
| are turning to secured loans in order to | | | | collected, businesses typically record an |
| consolidate their debts into smaller monthly | | | | allowance for bad debts which is subtracted |
| payments. However, these new loans are often | | | | from total accounts receivable. When accounts |
| paid over long periods of time, usually | | | | receivable are not paid, some companies turn |
| running into several years. If you find | | | | them over to third party collection agencies |
| yourself in a situation where you're | | | | who will attempt to recover the debt via |
| struggling to make ends meet, it's a wise | | | | negotiating payment plans, settlement offers |
| idea to seek financial advice. There are many | | | | or in some cases, legal action. Having a |
| companies which can advise you on the best | | | | default on your credit file can make any |
| way to manage your debts, or you could | | | | future applications for credit more |
| consult your local Citizens Advice Bureau for | | | | difficult, and multiple defaults or a County |
| help. | | | | Court Judgement (CCJ) will make applying for |
| | | | credit impossible. A defaulted account shows |
| If you fall behind with your payments, your | | | | on your credit file for a period of 6 years, |
| lender will usually try to contact you either | | | | whether the account is subsequently settled |
| by phone or letter in order to discuss your | | | | or not, while a CCJ will remain for 6 years |
| situation. It's a wise idea to keep your | | | | also, unless it is paid within a month of |
| lender informed of any changes in your | | | | issue. |
| financial circumstances, as lenders will | | | | |
| often be more flexible if you fall on hard | | | | Should you ever find yourself in a situation |
| times. Burying your head in the sand often | | | | where you're struggling financially, seek |
| only makes matters worse in the long run, and | | | | advice on how best to handle the |
| avoiding paying what you owe can have severe | | | | circumstances before they escalate out of |
| consequences such as ever-increasing arrears | | | | control. Burying your head in the sand will |
| or even bankruptcy. | | | | only make matters worse. |
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