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What is Debt ?

Debt can be defined as that which is owed to a person or company and usually refers to money owed. This type of debt will occur when a creditor agrees to lend money to the debtor with agreed repayment but the debtor can then not repay this. In most cases this will be with interest added in order for the person or company to make a profit. The repayments will usually be made over a set period of time or in one go. Being in debt can mean that you will have bad credit and may struggle to obtain credit in the future.

Different types of debt

There are a number of different types of debt that exist including the following;

  • Credit debts
    These occur when you run up debts on a credit card or store card. These are usually unsecured and are not seen as being a priority. Credit debts are usually classed as non-priority debts.
  • Council Tax
    These debts occur when you do not pay your Council Tax. If you continue to not pay these then you should be aware then you can be taken to court.
  • Income Tax and VAT
    If you owe these then you will find that bailiffs can be sent to seize goods from your property or business of they are business related debts. Please note that a court order is not required and they may also petition for your bankruptcy.

How long can it take to clear my debts ?
The length of time it takes to clear your debts will depend on a number of factors. Namely the extent of your debts and your ability to repay these. If you have to seek help then this will depend upon the type of insolvency procedure that you choose. If you choose an Individual Voluntary Agreement then this could take around 5 years to complete, a similar procedure known as Protected Trust Deed in Scotland will take around 3 years whilst bankruptcy will take roughly a year but could leave you with long term credit problems.

What can the creditors do to make me pay ?
There are a number of ways creditors can make you pay your debts and this will depend upon the type of debts that you have. They can ring and/or write to demand payment which can be stressful. They may also charge you fees for late payments which will just increase your debts. If the debts are more serious then they can contact debt collectors, threaten to take you to court, or petition for your bankruptcy.