If we cannot pay our bills as they fall due there is often a price to pay in terms of creditor hassle. Our unsecured debts will usually be incurred through our use of store cards, credit cards, overdrafts and unsecured loans.
We may also have secured debts such as a mortgage, a secured loan or car HP. The creditors who loaned us monies in relation to the secured debts have a degree of comfort or, if you like, security. If we default on secured debts, these creditors can take steps to repossess the property secured on the loan. In other words, they have a fallback position.
The unsecured creditors on the other hand, do not have this comfort. This is one of the reasons why the interest rates are higher on unsecured loans. So if we begin to default on the repayments of credit card debts or other unsecured loans, it is only to be expected that creditors will get a little nervous. They will often do everything in their power to persuade us to keep up the payments. They will write to us. They will phone us, often at home or on our mobiles and even at work. They will threaten to pass our debts onto debt collectors who may be an integral part of their operations or who may be a third party. They may sell our debts onto specialist debt recovery firms. They may threaten to take legal action against us such as to seek to obtain a charge against our property. The effect of such legal action, were it to proceed and were the court to approve a charge against our property, would be that the unsecured debt would become a secured debt. The legal action threatened might be to petition for our bankruptcy.
Debtors sometimes describe such creditor actions as hassle and when it is repeated often enough we label it harassment. But will it stop when we enter into an IVA (Individual Voluntary Arrangement)? The answer is yes. It may not stop immediately but the unsecured creditors are bound by the terms of the IVA. One of the standard terms used in an IVA proposal is that creditors will cease to pursue all legal action in relation to the recovery of unsecured debts. In practice ceasing such activity may take from six to eight weeks from the date of approval of the IVA at the meeting of creditors and this is often because the large banks and credit houses and other lenders are not terribly efficient at communicating the matter to their various departments. The debt collection department may be the last to hear of the approved IVA.
Since unsecured creditors are bound by the terms of the IVA and since interest and penalties must also cease to be applied to unsecured accounts, debtors are often concerned when creditors continue to chase up debts. No need to be concerned. Tell callers from your creditors that you are in an IVA and inform your IVA supervisor of such calls. Pass all correspondence threatening legal action including debt collection action to your supervisor. The IVA will afford peace of mind and any such harassment should diminish and cease in a relatively short period of time.