What are my Obligations to Creditors?
The average Briton now has more than £30,000 in personal debt. If you’re made redundant, servicing your debts could obviously become a problem.
Obligations To Existing Creditors
Many people who are made redundant wonder whether they should, or even have an obligation to, let their mortgage company or other creditors know of their situation. In fact there is no general legal obligation to let any of your creditors know. If you have payment protection insurance with any of the lenders, of course you should let them know and arrange to provide appropriate proof of your status. That should take care of your debt payments for 12 months.
If you don’t have any credit protection, and anticipate difficulties in keeping up with your payments, it makes sense to contact your lenders and let them know of your situation. You will usually find that they are willing to offer flexible payment options to help tide you over a difficult patch and get back on your feet.
Harassment by Creditors
It’s important to understand that simply because you owe money and are, at present, unable to pay it, you are not obligated to passively accept harassment from your creditors. The Office of Fair Trading issues detailed guidelines setting out what lenders or their representatives are allowed and are not allowed to do. They are not allowed to deliberately cause embarrassment or nuisance to you by calling you persistently, at unreasonable hours, or at work, for example.
It is extremely common for debt recovery agents to violate these guidelines, however. If they do, you can report them to the Office of Fair Trading, although sometimes merely threatening to report them will be enough to get the harassment to stop. In some cases, their actions may constitute a criminal offence under Section 40 of the Administration of Justice Act. Report them to the police if you believe this to be true. Keeping a record of exactly what they have done, together with any supporting proof or witness statements, will ultimately help you pursue action against them if it should it come to that.
You are not obligated to make yourself available for communication from your creditors in the manner of their choosing. It is perfectly acceptable for you to say that you will communicate only in writing with them, or that all communication should be routed through your representative (if you have one) rather than directly to you.
In fact, you are not obligated to communicate with the lenders at all. You can, if you like, ignore them completely. Be warned, though : if you do this, they will probably move to initiate bankruptcy proceedings against you.
In extreme cases, when all attempts at manageable payment options have failed, bailiffs may eventually come to your home in an attempt to recover the debt by taking away some of your possessions and auctioning them. It’s important to understand that you are not obligated to let the bailiffs into your home and you are not obligated to sign any document they present to you. The bailiffs are allowed to enter your home if they can enter it without breaking in. For example, they can enter via an open window if you have left one open. They will also often try to trick you into letting them in by asking to use the toilet or the telephone. Say no! If you do fall for it and let them in, they are allowed to impound your possessions afterwards.
Obligations to Creditors – Conclusion
If redundancy throws you into the position of being unable to repay your debts, the veneer of gentlemanly politeness with which lenders customarily conduct themselves is obviously going to disappear rather quickly. When it does, it’s important to know what your hard and fast obligations are, as prescribed by law.