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HomeSector InsightsBanking & FinanceWhat Laws Protect Consumers who are in Debt?

What Laws Protect Consumers who are in Debt?

According to a recent study conducted by accountancy firm KPMG, two-thirds of Brits are planning to cut their discretionary spending in 2023, as rampant inflation and the spiralling cost-of-living continue to bite.

This also follows a surge in credit card borrowing through 2022, as inflation peaked at 11.1% in October and households increased their borrowing in order to cope with soaring costs.

This could create significant long-term debt for households, but it’s important to note that there are laws to protect consumers who find themselves in financial trouble. We’ll explore these further in the article below.

Collecting Debt – What Can Creditors do?

While we’ve all seen television programs such as ‘Can’t Pay, We’ll Take it Away’, where bailiffs or enforcement agents attend residential and commercial properties to potentially remove goods to clear outstanding debts.

However, this is only possible after a debt has been escalated to the county court or higher, with this scenario rare in the case of consumer credit and unpaid credit card debts.

The reason for this is simple; it’s debt collectors rather than bailiffs who typically pursue credit card debts, with this group of people having fewer legal powers (they’re unable to remove goods to recover debts, for example) and required to follow more stringent processes to escalate cases to court.

In most cases, the debt collectors deployed by consumer debt creditors will contact you by phone, SMS, letter, and email in order to arrange a payment plan. While they can visit your home, the actual likelihood of this happening is vanishingly small.

How to Avoid Interactions with Debt Collectors

Prevention is better than cure when dealing with debt, but if you have begun to accumulate debt, it’s crucial that you take proactive steps to avoid interactions with debt collection agencies.

The first step is to consider ways of clearing your debt in one fell swoop, which may be easier if you’re a little older and a homeowner. For example, those of you aged over 55 could consider equity release, which enables you to access the cash value in your home in the form of a lump sum payment.

This can be used to pay down debt and clear it without incurring additional interest, leaving you with more discretionary income in the process.

If you’re younger, you could consider taking out a debt consolidation or bank loan at a lower rate of interest, in order to pay off higher interest rate loans and credit cards. This is a viable solution when dealing with lower levels of debt, so keep this in mind if your debt problems are starting to mount.

Understand Your Rights

We’ve already discussed the powers of debt collection agencies, but you should also understand what they can’t do when pursuing what you owe.

Agencies certainly aren’t allowed to engage in harassing behaviour, such as contacting you multiple times each day or early in the morning (or in the small hours). Similarly, they can’t pursue you through your social media profiles, or apply undue pressure to repay the cash that may involve you taking out additional lines of credit.

Additionally, you can hire a skilled bankruptcy attorney in Orlando or your area to understand your rights and options fully. Filing for bankruptcy provides relief from overwhelming debt and stop collection efforts. A bankruptcy attorney can explain the types of bankruptcy available (Chapter 7, Chapter 13, etc.) and help determine the best option for your situation.

To hire a bankruptcy lawyer, start by determining your needs and researching potential lawyers through referrals, online directories, and local bar associations. Check qualifications, read reviews, and interview several candidates. Choose a lawyer who fits your needs, budget, and comfort level, ensuring clear agreements on services and fees.

Similarly, they can’t tell anybody else about your debt or credit issues, as this infringes on your privacy and may contribute to stress or similar mental health issues over time.

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