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Falling into debt can be stressful, with creditors chasing you and demanding payment. In these circumstances, it may be tempting to buckle under the weight of creditor pressure to make it go away. However, there are steps you can take to stop creditors harassing you, giving you time to formulate a plan to repay your personal or sole trader debts.
What are my creditor’s rights?
Creditors are within their rights to send written notices requesting repayment for loans and any other debts you owe. If your creditors have made repeated demands for repayment, they can pass it to a debt collector, who in turn can chase you for payment. They can also issue a County Court Judgement (CCJ) for the amount owed.
If you’ve taken out a loan or finance that requires a legal charge such as security over your property, the creditor may have the power to take the asset, using the funds to repay the debt.
What can’t creditors do?
Creditors are within their rights to remind you to repay what you owe and pursue you for payment within reason. That said, they’re not allowed to call your home at unsociable hours, contact you via social media, use foul or threatening language, break data protection laws to obtain information, or imply that they have more legal powers than they do. All these are classed as harassment by the Fair Debt Collection Practices Act and are considered illegal.
What are my rights?
Although creditors have every right to send you reminders to repay what you owe, they must stay within the boundaries of the law. Creditors cannot have bailiffs make forceful entry into your premises or home, although they may enter if it is unlocked. In some circumstances, they may even use a locksmith. If commercial premises are involved, then they can force entry with the court’s permission. They cannot demand you pay anything more than the amount you owe them (unless interest applies). If your creditors resort to criminal acts; such as making forced entry into premises, claiming to have legal power they don’t. If a creditor does either of these or resorts to any other criminal act, you should contact the police.
Dealing with sole trader and individual creditor pressure
Once creditors contact you for repayment of debts, ideally you should pay them within the time specified. If you’re unable to repay the debt and creditors start putting pressure on you, there are options to reduce the burden.
Talk to your creditors
The first step in resolving your issues with personal debts is to talk to your creditors. Starting a dialogue with them could open opportunities for negotiating your debt into more affordable amounts. These could be formal or informal payment plans, depending on the amount owed, and who the creditor is.
Similarly, if you feel creditors are unfairly harassing you over the unpaid amount, you could complain to them. Make sure you speak to a senior member of staff. If you wish to make the complaint formal, have relevant details referring to what has happened up to that point. It would also be advisable to ask for confirmation of everything in writing.
If your sole trader debt is to HMRC, you can apply for a Time to Pay Arrangement (TTP). An informal arrangement that allows sole traders to repay HMRC over 6 – 12 months. You’ll need to apply for a TTP, and depending on several factors, HMRC may approve or reject it.
Speak to the authorities
If you’ve only received reminders to repay your debt, law enforcement won’t get involved. The only time police would intervene, would be if you’ve received criminal levels of harassment, which include threats to life, threatening language or if bailiffs, acting on a creditors’ behalf, breach their rights.
You can also find out if your creditor belongs to a trade association or professional body and complain to the relevant association or trading standards. If the creditor is a financial lender, you should see if they’ve broken any of the Standards of Lending Practice, and if they have, complain to the Financial Ombudsman Service.
If you have been issued a CCJ and feel you don’t owe the amount specified, you can apply to have the CCJ set aside, or struck off through the courts.
If you’re suffering from personal or sole trader debt, and you’re not able to repay your creditors, you should make them aware of your position and potentially come to an informal arrangement to repay what you owe over a period of time. If that fails, you can apply for an Individual Voluntary Arrangement or other insolvency options to help repay what you can afford. Alternatively, you could apply for bankruptcy as an insolvent individual. If your creditor pressure or harassment reaches unreasonable levels, you should complain to them first. If the harassment continues, you should speak to the relevant authorities.
How we can help
If you’re suffering from unreasonable creditor pressure on your sole trader business, or are harassing you, you should act immediately to avoid further action. We can talk you through the options available to you, and help you come to a suitable agreement with your creditors. We offer free, face-to-face consultations and operate nationwide. All initial advice is free and with no obligation.
A formal payment plan for individuals; an IVA
If your creditors are pressurising you to the point where you could become bankrupt, you can apply for several personal insolvency agreements. These options include an Individual Voluntary Arrangement (IVA), which allows individuals and sole traders to repay what they can afford over up to five years. You can often retain your home during an IVA, and after five years, any remaining debt is written off.
Other insolvency options
If an IVA is unsuitable for your circumstances, there are other debt-relief options you can apply for. A Debt Relief Order, for example, is useful for non-homeowners owing small amounts of debt. There is also a Debt Management Plan; an informal agreement that allows you to pay back unsecured debts through monthly instalments.
If these options are unsuitable for you, or your debts are too heavy to repay within a reasonable time, you may be better off going bankrupt. Creditors can force you into bankruptcy if you owe more than £5,000, or you can apply for it yourself. Bankruptcy is often seen as a last resort, though it can be viable if you have no high-value assets or low income. You’re protected from any creditor action during the one year that the bankruptcy generally lasts.