Debt management

Debt management

18 September 2013
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If you have taken out a loan or hire purchase agreement and your financial circumstances change and you are unable to keep up with the payments, creditors possibly with ask you to return the item, which of course can be anything from a television to a car. But if you have already paid over a third of the total amount for the item purchased, then the lender will have to proceed firstly through the county court.

When you have paid less than a third of the total debt, the lender (or creditor) will only need a court order to seize the item or items from your property. However the court order is not required when the item is being seized from a public place, in the case of a car for example a street or road.

If a creditor decides to pursue the matter in court, you should bear in mind that the court system is designed to help you and the creditor, and if you can or are able to repay the debt amount in acceptable instalments the court may decide to let you hold on to the item.

Paying More than a Third

When a third (or over) of the debt has been paid the creditor has to obtain a ‘Claim Order’ from the court. This then compels you to give back the goods. The court will supply you with a ‘Admission Form’, this enables you to make a revised offer to make new monthly payments to the creditor, and to make clear your personal financial situation.

The admission form must be returned to the courts within a 14 day period. The court will then contact the creditor to find out if they will agree to your new terms of payment. If the creditor accepts the revised offer then the court hearing will no longer take place. If not accepted or the form is not returned the hearing proceeds.

It is then the decision of the court to impose the ‘Return Order’ or not, they could also suspend the order meaning it would still be enforced if future payments were missed. If it decided that you can keep the item, then the court will set up revised payments. It is advisable to attend the court hearing, if you don’t the judge will more than likely grant the ‘Return Order’.

Paying Less than a Third

In this situation, you can the creditor if they will agree to the terms, which might involve higher amounts being paid, to take into account the arrears. You often find that the creditor is eager to assist. You may also approach the Court for a ‘Time Order’ which can then be altered to revise the amount payable, alteration of the interest rate or the period of the loan.

If you choose to terminate the Hire Purchase Agreement

In some circumstances, it may be more practical to end the agreement, particularly when you are unable to make sufficient payments.

When are You Able to End the Agreement

Ending a consumer hire purchase agreement can be done at any time before the last (token) payment is made. All payments made are for rent, except the final one which is divided between rent and a nominal amount to genuinely buy the item or goods. This does not apply to business to business agreements.

You can also end the agreement by simply returning the goods. But you must also tell the creditor in writing that you are ending the agreement. The termination will not be treated as voluntary if you do not do this and you will not be able to take advantage of the 50% limit on your liability. Retain a copy of the letter sent, as you may need it as proof. Your agreement documents should detail any special conditions that the creditor may have for ending the agreement.

After the Goods Have Been Returned

If you have returned the goods and there is still an outstanding debt amount, this should be treated in the same way as any other form of debt. You should immediately contact the creditor in writing if you dispute the debt amount payable. Should the creditor choose to take the outstanding debt to court, you will get a ‘Claim Form’ and be given the opportunity to state your case which is the same procedure for any debt.

If you wish to complain about the way your account has been managed, you should in the first instance follow the creditors (lenders) complaints procedure. Beyond this you can complain to the Financial Ombudsman Service.