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In debt? What's the worst that can happen?

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Struggling to pay your bills can be stressful enough as it is, but once bailiffs or debt collectors start knocking on your door, it can become frightening too. We explain what steps your creditors are legally able to take to reclaim your cash.
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Debt collectors and bailiffs are not known for their manners – they have been known to harass people at work and threaten to throw them in jail.

Such behaviour is not permitted - there are rules and regulations governing the collection of debts that offer you protection if debt collectors call.

Who is chasing you for payment?

It is essential to know who you’re dealing with so that you’re clear on what they are legally allowed to do.

Debt collection companies are used by banks and building societies to chase unpaid debts on credit cards, overdrafts and loans.

They are also used to collect debts by:

  • Utility companies

  • Payday loan companies

  • Non-financial businesses

However, they do not have the same powers as bailiffs, and they are more restricted in what they can do.

Did you know?

There is a difference between what debt collection companies and bailiffs are allowed to do to reclaim money? Unlike a bailiff, debt collectors do not have the right to take anything from your property. They can only ask you to make a repayment; they cannot force you to do anything.

Whether a debt collector or bailiff is appointed will largely depend on the type of debt you have outstanding.

Bailiffs

Bailiffs - or enforcement agents as they are formally known - have more powers than a debt collection company.

However, a bailiff can only be used if a debt collection company fails to recover your outstanding payments and the company you owe money to successfully takes you to court. The exception to this is if you fail to pay your council tax or are convicted of an offence and do not pay the fine. The court can hire a private bailiff to collect your debt in these cases.

What can they do to recover your debts?

The guides below answer everything you need to know about what debt collectors and bailiffs can do to reclaim owed money:

How to deal with debt collectors

Are debt collectors allowed to harass you?

Can debt collectors take money from your bank account?

How to complain about a debt collection company

Can you get evicted for unpaid debts?

If you have an unpaid mortgage or another loan secured with your property, your home is at risk. If you fall behind with repayments, the creditor is entitled to repossess your home to get its money back. 

However, this is a worst-case scenario, and lenders tend to avoid repossessing homes where possible. In fact, Financial Conduct Authority rules mmean that creditors must treat you fairly and properly consider any suggestions you make to help rectify the situation. You can agree on a plan of action together, which could include: 

  • Extending your mortgage

  • Deferring interest

  • Switching you onto a different mortgage

  • Adding arrears to your mortgage

If you can’t agree on a repayment plan, your lender should allow you time to sell your home yourself if that’s what you would prefer.

Should this process fail, there are strict rules that your lender needs to follow to take you to court. This is known as the ‘pre-action protocol for mortgage arrears’.

What about unsecured loans?

There’s no risk of losing your home with unsecured loans or credit card debts, but if you repeatedly miss payments, the lender could take you to court to get its money back. Should you continue to struggle, you may eventually have to declare yourself bankrupt, and that could see you lose your home.

Can you go to prison for unpaid debts?

No, you can’t go to prison for unpaid debts – not unless you have knowingly committed fraud and someone proves it in a court of law.

The exception to this is council tax debts – if the court decides there’s no good reason for you not to pay council tax or if you simply refuse to do so, you can go to prison. However, it’s exceptionally rare for this to be enforced.

It is illegal for a debt collection company to imply that non-payment will lead to criminal proceedings; this is considered to be a form of harassment.

What if they threaten to send you to prison?

If you have been told by a debt collection company that you will go to prison unless you pay up, this is harassment and is in breach of legislation. You should complain to your creditor (for example the bank, building society or utility company to which you owe money). Alternatively, you can complain to Trading Standards.

Contact Trading Standards through GOV.UK