Issues With Debt

What is a Debt?

When a person, organisation or company borrows an amount of money from another party, it is called a debt. This type of borrowing is generally used to buy something that is very expensive. The borrower can repay the borrowed amount in small instalments over a period of time. Lenders generally charge an interest on the amount they lend. The borrower must repay the principal amount as well as the interests that accrue on the principal amount. Debt examples include loans, credit card borrowings and line of credit. Online users should be aware of scams that target people in debts. They may receive bogus legal notices from fake financial crime investigations Department.

More information on financial crime investigations

What Are the Laws around the Debt?

There are many laws that cover various debt issues. Both the borrowers and the lenders have to comply with these laws. Money borrowed without complying with these laws makes the deal illegal. There is no legal protection to both parties if they get in any such deal. UK debt laws have been designed to protect the interests of both the borrowers and the lenders. There is protection for the debtors who cannot repay their debts. They can renegotiate the loan terms or declare bankruptcy. Lenders must follow proper process when claiming dues from the borrowers.

What Happens When Someone Gets into the Debt?

There are various remedies for the borrowers who get into the debt. One option is to renegotiate the loan term. It can result in solutions like deferred repayments, smaller monthly repayments, or clearing the debt by other means. If the borrower fails to repay the debt, the lender can initiate the loan recovery process. It can result in the borrower being declared bankrupt. In extreme cases, the borrower can be arrested and sentenced to a prison term but it is never for not repaying the debt. A person can be sent to the jail only for debt related issues like fraudulent means used to obtain the credit.

How Can People Get Help with the Debt?

One option is to consult the lender itself. Most banks that lend money have support systems for the borrowers. This approach should be used only by people who are well-versed in the complex debt restructuring process. Lenders always avoid agreeing to a deal where they lose their money. There are debt consultants who help borrowers. The consultant renegotiates with the lenders on behalf of the borrower. The professional can help with a debt consolidation deal that is mutually acceptable to both parties. There are some government and private support groups that provide help to people who are unable to repay their debts.

Why Do People Go into Debt?

People go into debt when they fail to repay the borrowed amount. A person can lose the job or income source that helped repay the debt. A business can lose its market share due to lower demand for its product or service. Its income can go down due to competition, changes in the laws, natural calamity, accidents, or other reasons. Some people live beyond their means by borrowing more than they can repay.

How Are Debt Issues Commonly Resolved?

Debt issues can be resolved by working with the lenders. A borrower unable to repay the debts can declare bankruptcy. If the case goes to the court, it is for the judge to decide how the debt issue should be resolved.