Legal Action by Creditors
Different methods are available to different creditors to recover money from their debtors, in case of non-payment of dues.
Types of Creditors
-
Secured creditors
Secured Creditors rank very high with regards to receiving payments. This is on the grounds that secured lenders have a charge over resources held by the debtor. These benefits can incorporate property, and in addition vehicles, hardware and installations and fittings. A secured creditor stands a higher chance than the greater part of getting payments following bankruptcy.
-
Unsecured creditors
An unsecured creditor has no interest on any of your specific property. Credit card issuers are an example of unsecured creditors. There are just two ways an unsecured creditors can get paid. First you can pay the obligation willfully, else they must sue you, get a judgment against you, and seize your property and sell it to creditor’s claim.
The legal process followed by Creditors to get their debts paid are as follows:
Letter of Demand
A letter of demand is usually sent when you have tried unsuccessfully to get your debts paid and it is the right time to take more serious action by creditors on you. Often this is the final reminder letter before taking legal action by creditors.
A creditor can likewise depend on letter of demand in court procedures to demonstrate their endeavor to settle the issue before documenting a case. An indebted person may react to a letter of demand by ponying up all required funds, looking for a reimbursement game plan or arranging a section installment as a byproduct of the bank ceasing from legal action.
Bankruptcy Notice
A bankruptcy notice is a formal notice of demand issued by the Official Receiver requiring a debtor to pay a debt within 21 days of service of the notice. If a debtor does not respond to the notice within 21 days, then the creditor has the right to file a petition in the court, to declare such debtor as bankrupt.
What to do when received a Letter of Demand?
Do not ignore the notice. You can still payback the debt even after you have received a notice. The Creditor will most likely need you to additionally pay their legitimate expenses. You should consult with the creditor about how you will pay. When this is done, make an agreement with the creditor. Do this under the watchful eye of any real court. Ensure the creditor files a Notice of Discontinuance with the court. This will stop the court activity against you.
Statement of Claim
Where a debtor fails to pay back debts and fails to respond to notice, the court will grant judgment in favour of the creditor. This is a decision of the court confirming that the debt is owed by the debtor to the creditor for the amount stated on the judgment together with costs.