Under pressure from creditors? Understand their rights and yours

If you’re company is undergoing financial struggles then keeping up with repayments to your creditors might be difficult, if not impossible depending how much you owe.

When you’re behind on your payments, the smart manouver will be to open lines of communication with people you owe money to and maintain a direct and honest dialogue with them if you want to avoid extra pressure. 

 

It might be a good time to fully understand what your rights are in this situation and what creditors are allowed to do as it is critical to managing the situation. 

 

What rights do creditors have?

 

Creditors have a number of tools at their disposal which are designed to help them recover money they are owed. 

 

One example is that they have the legal right to charge interest on late payments or pursue legal action such as statutory demands, winding-up petitions and County Court Judgements.

 

Usually a creditor will take a debtor to court in order to begin a formal insolvency procedure which might eventually lead to bankruptcy, if they’re unable to issue repayments for a certain period of time. 

 

Typically this would only happen after they’ve been served with a statutory demand that requires any debt of £750 or over to be paid if it hasn’t been paid within 21 days. 

 

Often, creditors choose to pass the task of obtaining payment to bailiffs or debt collection agencies or they may choose to sell the debt onwards to a third party – which can make it more difficult to negotiate payments. 

 

Creditors also have the right to serve a written notice which requests repayment in full along with any interest owed as a result of late payments.  

 

What rights do you have?

 

While creditors have the right to demand repayment for money that’s owed to them – there are still limits to their rights. If they go beyond them then there are court-based remedies available to you that could reduce or eliminate the debt entirely. 

 

These include:-

 

  • Creditors are not allowed to harass or intimidate

While you have a duty to keep creditors informed of the situation, they aren’t allowed to call frequently, at unsociable hours or make threats against you. Creditors are also banned from following you on social media for the purpose of digital harassment.

 

  • Data protection

Creditors aren’t allowed to break data protection laws – this means they can’t call any of your neighbours, employees, friends or relatives in an attempt to access or coerce repayments from you.

 

  • Due process

Creditors cannot threaten to take court action if they don’t have the right to do so – or tell you that you’ll be imprisoned if you fail to make payments or pay off your debts.

 

  • Large repayments

Your creditors can’t demand that you make larger repayments than you actually owe – although remember that they can place additional interest onto the original debt. 

 

Speak out against harassment

 

The most obvious way to alleviate creditor pressure is to find ways of repaying the debts that you legally owe. 

 

This isn’t always immediately possible for every business so the best thing to do is to speak directly to creditors regarding your current financial situation to determine whether a plan for repayment can be negotiated that’s in the best interest of both parties. 

 

If you do consider that you’ve been harassed and choose to file a complaint then you’ll need to include documents and any evidence to support your claim including letters or messages received from collection agencies etc. 

 

Dealing with Creditors

 

This can be intimidating or frustrating but you have as much right to speak out against any harassment and threats as they do to seek out repayment.

 

If you feel that your creditors are being unfair in the way that they’re dealing with your debt then you can speak to them about your concerns or you can get in touch with us formally where we can discuss what we can do to help you.