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What Is A Default Notice?

You may be sent a default notice by a creditor if you have failed to meet your obligations to them according to your credit agreement. This is a formal letter that should not be ignored -- it is usually sent out when you have ‘defaulted’ on your account and have built up arrears on what you owe.

The notice has to be sent out legally to notify you of your default -- this is one of the many legal steps that a creditor can use when you are not paying them back as you should. And, although this is just a letter it can have a big impact on you and your finances. Most default notices will list the following information:
  • Creditor and debtor details
  • Details about the original credit agreement
  • Details of your default on this agreement
  • Early settlement figures (if applicable)
  • Anything that you can do to sort out your default
  • Details on what your creditor may do next if you do not make good the situation
For example, this notice may be the precursor to formal legal action that the creditor is telling you that they will take. They have to do this legally. Your notice will usually give you 7 days to do what your creditor is asking to make things good. If you comply with this then no further action will be taken.

If you don’t then your creditor could well take court action against you. You may, for example, be sent a claim form which means that your creditor has approached the County Court to get a County Court Judgement (CCJ) against you. If you owe the creditor more than £750 then they have the right to try and have you declared bankrupt as an alternative.

It is wise to try and avoid this getting to court or further legal action. Bear in mind that your creditor simply wants their money back here. If you cannot repay it in full or as specified in your default notice then you may be able to get them to agree to a different repayment solution instead. So, do try to open lines of communication with them.

Another drawback to the default notice scenario is the fact that it will automatically be entered on to your credit record held by the credit reference agencies. It can stay there for around six years if it isn’t dealt with. This can cause you a lot of problems down the line with your future dealings with all kinds of companies.

If you later try, for example, to take out a new credit product such as a loan, mortgage or credit card then the lender will be able to see that you had a default notice issued against you. This shows them that you have had financial problems in the past. It will therefore make it much harder for you to get the credit products you need as they may well turn down your applications.
| IVA Basics | Trust Deeds | IVA and Utility Bills | IVA Case Study | Default on IVA | IVA default notice | Statutory demand - what to do | Stop creditor making you bankrupt | IVA Failure |