Debt means owing money to someone. It is the borrowed money or loan that one takes and agrees to return in a specific period of time. Debt is often returned with an interest amount, keeping in focus the time value of money. People take debt to meet their different unavoidable needs and requirements. The person or company that borrows the money is called the debtor while the person or company lending the money is called the creditor.
Debt or any kind of borrowed money has to be returned within a specific period of time. It is the legal right of the lender to get the full amount back in a timely manner. Debts do not become a problem if a person is able to pay them back in a timely manner, but if the debts become out of control and one is unable to pay them back, it creates many problems. People use several methods for the collection of debt like debt prison, debt bondage, charge-off etc., but with the growing awareness of human rights, debtors were also given different rights.
The process to be followed when you cannot repay your debts depends upon what is the usual course that the company follows for debt recovery, and what amount you owe the company. If one stops paying the debt, even when being able to pay, the lender has a simple legal way to sue him/her. If one is making effort for repayment and has communicated it to the lender, he may get an extension in the time period.
If you do not pay back the debt, the lender would persistently call and remind you abut the outstanding debt. Some traditional businesses and companies sue the person right away, but people now find negotiation a better option. If you cannot repay your debt then first of all communicate your problem to the creditor. If a repayment plan is not agreed upon by the debtor or the creditor, there are several other methods that the creditor can use for collecting the debt.
The lender usually files a case against the debtor for the recovery of the debt and can even get the possession of some of your assets. Other than possessing your assets, the company also sometimes gains the right of wage deduction, taking over a bank account or wage assignment.
If one is unable to pay back the debt amount, there is a negative mark on the credit history. These negative marks can stay on your report for many years, and you would not be able to get any more loans from a registered company or a bank.
When it comes to the outstanding credit card debt, the company or the person cannot get or possess any of your property. The companies also have a time limit to collect the complete debt amount. It does not mean that the person can get away with all the debt. The companies usually take the case to courts, and if not completely, the debtor has to pay back a certain percentage of the debt amount.
To avoid these circumstances, many banks and companies and even people, who are lending money, often ask for some securities. If one does not have insurance or a permanent job then one has to deposit some securities, bonds, shares or important property papers etc., so that if one is unable to pay back the debt, the company still has a repayment plan.
Edward Woodwards is a financial consultant. You can take IVA advice and solutions to debt problems
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