Default or CCJ?

Leon_Telford

Which is worse? And why? Always wondered.

Tixy

A potential lender would usually / most likely consider a CCJ is worse.

A default sometimes cannot be helped (loss of job, ill health etc that means you cannot meet commitments - arguably people should plan for this of course). But the debtor might still have done all they reasonably could after the event, could be slowly repaying the debt / be in a DMP or similar.

A CCJ would imply to other potential lenders that you didn't necessarily keep in touch with the creditor and didn't pay what you could reasonably afford to do so.

Neither of those statements have to be true in any individual case. A creditor could get a CCJ when a debtor has done all that they can, but most creditors don't apply for them lightly.

All that said some potential lenders would view the presence of either as equally bad.
And also they may look at the amounts involved, maybe some would think that a £6000 default is worse than a £200 CCJ for example.

Leon_Telford

Thanks always wondered. Stupid question again (Sorry) whats the difference between unsecured loan and secured? Presume unsecured means ballifs cant take anything from you?

Tixy

Unsecured is not secured on anything. If you default on the loan, your creditor could still take court action and obtain a CCJ to try to get you to repay. If you still don't they can enforce the debt by appointing bailiffs. And yes they could then potentially take your possesions - either from outdoors like a car, or if you let them into your house from in your house.

rising_from_the_ashes

Leon_Telford wrote: »

Presume unsecured means ballifs cant take anything from you?

No, not at all ..... however, there are set procedures which must be followed for them to legally be able to take stuff.

Leon_Telford

So for example Joe Smith loses his job and cant afford the usual £200 per month loan payments anymore BUT contacts the Bank and agree to pay £50 a month, that is a default? A CCJ is when Mr Smith just ignores the bank all together?

rising_from_the_ashes

Leon_Telford wrote: »

So for example Joe Smith loses his job and cant afford the usual £200 per month loan payments anymore BUT contacts the Bank and agree to pay £50 a month, that is a default? A CCJ is when Mr Smith just ignores the bank all together?

The bank would have to apply a default or go to court for the CCJ - they're not automatic. ETA and Mr Smith would've had to have been advised of this before either happened

You are on the right lines tho' - a default is likely to be issued if the original T&Cs of the agreement haven't been stuck too (eg late payments, less than original amount etc).

It's unlikely (but I am happy to be corrected on this) that a creditor would apply to court for a CCJ if a payment plan had been agreed & stuck to.

Tixy

Thats right. Its possible a creditor could apply for a CCJ in the first case, because the agreement has been broken. But they weigh up the cost of doing so, the 'treating customers fairly' and whether they'll actually get any more money any quicker by obtaining a CCJ.

Even with a CCJ the debtor can ask the court to let them pay in installments and if the court decide that the debtor can only reasonably afford £50 a month then they will still be allowed to pay that, and bailiffs couldn't then be instructed.

The one time when a creditor taking court action is more likely even when you are keeping in contact and paying them is if its likely to take a ridiculous amount of time to repay the debt (eg you can only afford £5 a month to a £10000 debt) and if you have assets / a homeowner.
In those cases some creditors will seek a CCJ in the hope of then being allowed by the judge to secure a charging order on the property.

Certainly the best advice for anyone with financial difficulties is to pay what you can afford and keep in touch with your creditors.

Leon_Telford

Thanks! Understanding it all now more....... are banks likely to apply for CCJ's or just 'private finance firms' more?

I'd presume a bank would have more patient given they have more customers?

Tixy

Banks are less likely to apply for CCJs for small amounts
(eg mobile phone companies happy to get them for a couple of hundred quid)
And by subscribing to the lending code banks should be more likely to treat their customers fairly and to listen to the individual case and circumstances. Should be.

Some banks (eg MBNA) seem to be going for more frequent CCJs and in turn going for charging orders than they ever used to.

Leon_Telford

What UK main banks are the better ones to deal with over stuff like this?