Debt is the amount of capital borrowed by one party from another usually with the stipulation that it is to be paid at a determined date with a certain amount of interest. The lending and borrowing parties could involve banks, companies or just individuals. Debt is a means for individuals or corporations to make purchases or payments they were previously unable to. It has various forms, ranging from mortgage loans to credit card debt.
The two prevailing forms of debts are personal and business debt. The laws dealing with these two types of debts vary significantly, so it makes sense to take a look at them in more detail.
This debt is taken on most commonly by businesses or by individuals on behalf of a company. It can be in several forms such as a personal loan, business loan or corporate bond.
Taking on business debt isn’t short of challenges. There are several risks befalling the applicant socially and fiscally. For instance, if taken from a creditor, you may face charges for missed or late payments, a high level of interest, repossession of belongings, and seizing of assets.
Likewise, the lender takes on risks when offering a loan, especially to new businesses. The most obvious risk is the need to initiate costly and lengthy legal proceedings over non-payments or the business collapsing and giving into liquidation, in which case the lender’s investment goes down the drain.
There has to be a legitimate claim for any type of Business Debt Recovery.
Personal debt is a type of debt for which an individual alone is held liable. This category may include more than one person as well such as when a couple takes a loan for a house. Keeping this in mind, this is essentially debt for personal means and not for fulfilling any business needs. In a way, this debt is taken for consumption and not investment.
The definition of personal debt can be further broadened by taking into account the ways in which this debt can be acquired. Secured debt is obtained when the lender is paid some form of collateral up front, while with an unsecured debt, there is just a promise that it will be paid.
This type of debt is extremely common because without it, it would not be possible to pay for a home, education or car for a large percentage of the population. However, it can also be a source of a lot of stress, especially if this debt is passed down to the spouse or heirs upon the death of the borrower.
Similar to business debt, personal debts are risky for lenders as well, especially if the individual is a stranger. This is why most lenders need one to meet extensive requirements before giving a loan.
Defaulting on Loans
Many people fail to give the loan back. For individual lenders, this can be a tricky situation to navigate. Let’s consider some methods employed to collect on these debts. These methods are used when the borrower is late to make a payment or is plain unresponsive to any type of contact.
Once there is a delay in payments and you feel the debtor might end up defaulting, you should resort to this method as one of your first modes of action. A statutory demand is in the form of a written formal request and asks for a debt payment to be made. Once this is set into motion, the debtor must respond within 21 days and choose to either settle the debt immediately or agree to a plan on how the debt will be collected.
You can send representatives to the lender to collect the debt. If the debt is not recovered, the creditor can file a motion within four months to bankrupt the debtor. This motion can only be filed for debts which are not more than 6 years old and are over £5,000.
Reach an Out-of-Court Settlement
Although the debtor has ruined their reliability by failing to pay at the agreed time, the odds of securing funds quickly and smoothly are higher if you adopt a polite approach or have mediation. Try your hardest to contact the borrower and remind them of their obligation to pay back what is owed. It is possible that by some odd chance, they might have actually forgotten about the debt.
It is also possible that your debtor is experiencing financial difficulties. In this case, mediation is the way to go so that you may recoup whatever amount is possible without having to go through the hassle of courts. While mediating, the original arrangement can be amended, adjusting the time frame, interest amount and total debt.
Recruit a Debt Collection Agency
When all else fails and you really need to cover your losses, use this method as your final option. Debt collectors are ruthless and resort to all kinds of methods. Before recruiting them, think about the message this might send to the debtor, especially if they are family or a close friend.
Another similar, cheaper and, at times, equally reliable option is to recruit the services of a solicitor. Hiring a solicitor sends a serious message to the debtor. If they were just being lazy, they would be stirred into action upon seeing a letter from a solicitor. It can be a great way to instil a sense of urgency in the debtor without going to the extremes.
Notable services you should know about. The best choice for Personal Debt Collection Agency in the UK is Frontline Collections. Federal Management are the leading B2B Debt Recovery service.