But how does this affect people with serious debts? Well, if there are others in a similar situation, whereby the small amount of equity they had in their property has been eroded by falling house prices, they should take some pleasure from knowing that their creditors won’t be able to take any money from their house as there is no money in it!

However, this is not entirely the case. I have heard from some debt collectors that they will look to get a charging order from the courts, such that when you come to sell your property, there will be a charge for the amount of debt you owed to your creditor against your property. This would mean that if you owed £10k on  loan that you defaulted on, and they got a charging order on your property, you would have to redeem this charge with the proceeds of your sale before any leftover equity was passed back to you upon completion.

This could be bad news, so it would be best to consider getting your debts settled rather than allowing this to happen. If you need help settling your debts seek professional advice from these guys.

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What happened was that my home phone received a phone call from them every couple of hours, each time it was a recorded message asking for me, and asking me to press number one to hear the message.

In addition to having my home phone number bombarded with these incessant messages, I then had my mobile phone number bombarded with text messages asking me to phone Barclaycard about my account.

The final message said something about a debt collection agency getting involved if I didn’t get in contact with them ASAP.

I just ignored all the calls and messages for a couple of days while I figured out what I wanted to do. I’ve already settled one of my debts with Barclaycard for significantly less than the debt was worth, so I figure I’m entitled to settle my other Barclaycard debt for less, given that more time has passed since the first debt was settled.

Last night, I did follow the instructions on the Barclaycard message and eventually got through to speak with an operator. This lady was not a native english speaker so the telephone conversation was not terribly concise.

After establishing with this lady that I could not afford the amount they were asking me to pay, and that I had already written to them to explain this, she suggested that I setup a debt management plan.

I told her that it was in Barclaycards’ interests to accept the amount I can afford directly from me, rather than go through a debt management company who will only take a % from the money I pay each month, thus leaving less money for Barclaycard, but she didn’t seem to grasp this concept.

I then offered 20% as a full and final settlement if she accepted on the spot, she refused saying that they don’t offer full and final settlements, which I informed her was rubbish as they had already settled my other account.

She then said they can’t offer me a full and final settlement on the account in question, so I replied that they will just have to accept what I am paying them until they come to their senses and accept a full and final settlement. I then prompty hung up as the conversation was not going anywhere.

It does amaze me that in spite of overwhelming evidence to suggest that what I have offered is the best deal for them, there is still this feeling that it would be more beneficial for the creditor if I were paying my monies through a debt management company – why? It will only reduce what Barclaycard receive as a monthly payment – bonkers in my opinion!

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Once a borrower has defaulted on a debt and ceased to pay the agreed amount under the terms and conditions of the borrowing, the value of the banks asset decreases (your detbs are the banks assets). This is simply a result of the fact that the asset will not earn as much money as it had done before, in some cases it will never generate income again.

This is no different than the value of a football club decreasing when it is relegated from the Premiership to the Championship, which is a reflection of the fact that the money to be made in the Championship is far less than in the Premiership.

Have you ever watched Dragons Den on the television and wondered why various entrepreneurs value their business at £1million when they have yet to make a profit? Day dreaming is what they are doing, but if they could think rationally, they would see that without any profit, their business is worthless – the same can be said for your debts when they stop generating income for the lender.

This is why debt collection agencies buy the debts. The debt collection agencies believe that they can add value to these debts by either getting the borrower to start repaying the money owed, or simply pursuade the borrower to repay a portion of the debt, ensuring that on average the amount of monies reclaimed from borrowers exceeds the money spent on buying the debts in the first place.

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From my own experience, I have had creditors ringing my home everyday in some cases, leaving voicemails daily and writing threatening letters.

It doesn’t bother me as I understand that they have to do this as its’ just their job and it will work on some people who will allow themselves to be “bullied” into making payments they may not be able to afford.

I know that if I make regular monthly payments, regardless of whether the payment is well below what the creditor would consider satisfactory, the creditor cannot really do anything about it. The creditor has to accept the payment and hope that I can reduce my outgoings or increase my income.

It’s unlikely that I would make any effort to reduce my outgoings just so that I can increase my payments to my creditors, and while I owe money and am obliged to pay it back, I have no real incentive to find a better paid job – all it would mean is that I have more money left over each month to pay my creditors.

So how does collection harassment benefit the creditor?

As you can see from my own experience, it doesn’t really, it just slightly angers me and strengthens my resolve not to pay more than I have to back to these people.

However, I can see that many people who are in debt are not in the fortunate position that I am in. They may well have equity in their homes, they may well have significant assets that could be used to repay the debts or they may be earning much more money. 

If so, and were the creditors to take them to court, they could be ordered to pay back the debt through liquidating assets or pay it back from income, or worse still, have a charge put on their property such that when they come to sell, they would have to repay the debt from the equity in the home.

In situations like this, debt collection harassment works because it plays on the emotion of the situation and the rational thought process.

The emotional part is pride being dented, not wanting to be pushed around or have debt collectors turn up if one lives in a nice neighbourhood.

The rational thought process goes along the lines of, if I get a court order to repay the debt at £500 a month for 5 years (for example), that would be  a severe tie, or simply the fact that all the equity that has been built up in the home could be lost leaving one starting at the bottom of the property ladder, again.

What can you do to stop debt collection harassment?

The simplest thing is to make an agreement with your creditors to pay them a regular amount. This does not have to be the minimum payment, nor does it have to be the 1% figure that the Consumer Credit Councelling Service require before they setup a debt management plan – it can be as little or as much as you can afford, as long as you explain to them what you can afford by way of a budget.

To work out your budget and see what you could realistically pay under a debt management plan, take a look at this website Help Me Get Out Of Debt which allows you to create a monthly budget for income and expenditure, and at the end of it gives you a realistic figure that you can afford under a debt management plan.

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He was talking to a debt collection agency recently that had managed to buy £1,000,000 worth of “assets” from a well know high street bank for the princely (or more accurately, pauperly) figure of £70,000. That’s correct, just 7% of the value of the debt outstanding, and the debt collection agency has the right to collect for up to £1,000,000 – thought its’ highly unlikely they will collect anywhere near that amount.

So if you are suffering with unmanageable debts and can’t see a way out, then the best thing to do is get yourself into a debt management plan for twelve months, then start making your creditors an offer – this will be especially effective if your debt has already been passed onto a debt collection agency as they will be in profit if you offer them anything over10%…

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