We can't give you legal advice and the following should not be viewed as a legal opinion, but it does set out some of the legal action that a lender may take.

Default Notices

Where the debt you owe is a credit agreement which is covered by the Consumer Credit Act 1974, a lender will need to issue a default notice to be you before he can take further action to recover the money you owe. So, in itself it's not a legal action.

There is separate legislation which sets out the format and content of the default notice with which the lender must comply.

The default notice will set out how you have breached the agreement, e.g. you have failed to make the required payments and the amount which is outstanding. It will also state the amount that must be paid and you must be given at least 14 days to pay this. If you do not pay within this time the lender can commence further action and can also register a "default" on your credit file, which will make obtaining credit in the future more difficult.

If you do pay within the 14 days the default is treated as if had never happened.

County Court Judgements

A lender is permitted to submit a claim to the County Court setting out the money that you owe.

When you receive notice from the court that a claim has been submitted it will send you a claim form.

If a claim is issued against you do not ignore it as a judgement could be entered against you.

The form gives you chance to explain your situation. There will also be an Admission Form which asks for details of your income and outgoings and you have the chance to make an offer of payment.

You have 16 days from the date the papers are sent (not from the date you received them) to send the forms back to the court.

If you can't afford to pay all of the amount in one go, you can fill in the Admission Form and state that you want to pay in instalments and enter the amount of these.

If you do agree that you owe the money but disagree with the amount, the Admission Form is still completed but it needs to be sent to the court. You will also need to explain what you think you owe and why. You can then either send the amount with the form or offer to pay by instalments.

If you disagree totally with the claim you can complete the Defence Form. In this instance, you need to answer all the points raised in the claim and send it back to the court.

You can also ask for more time to respond, for example, if your defence is complicated, by completing and returning the Acknowledgement of Service form. If this is sent back in time, it will allow you a further 14 days to complete the defence form and respond.

There may be a hearing in the court to consider the facts of the case.

After this, if the court finds in favour of the lender, it may issue a County Court Judgement, which is an order telling you to repay the debt.

A County Court Judgement stays on your credit record for a period of 6 years, which will make obtaining credit in the future more difficult.

If it is paid in full within 1 month of the Judgement, you can apply for a certificate of cancellation which means that the CCJ will be removed from your credit record.

Charging Order

If you do not pay a County Court Judgement, and you own your own home, a lender can go to court to obtain a charging order against it.

This would mean that the lender has a charge against your property so that if it is sold it would be able to reclaim the money that is owed to it before any money left over is returned to you.

Statutory Demand

A statutory demand is a request for payment within 21 days. If payment has not been received within that time, then the lender can petition for your bankruptcy.

However, be aware that some unscrupulous lenders and collection agents issue a statutory demand as a scare tactic when they have no intention of petitioning for your bankruptcy.

The OFT has publicly said that a statutory demand should not be issued unless there is a real prospect that bankruptcy proceedings will be taken. The OFT has also set out the circumstances where it considers the use of a statutory demand to be inappropriate. These include where:

• The debt is statute barred
• The lender is aware that customer is no longer resident at the address
• There is a valid dispute which remains unresolved
• The lender has received evidence that the debtor meets the definition of a "sensitive case"
• Where the lender is notified that a third party is acting for the borrower and will provide an income/expenditure statement within 28 days
• The debtor is unemployed, without assets and has provided proof of this to the lender
• The debtor has provided an income and expenditure statement supported by proof and has made a reasonable offer of repayment.
• The debtor has zero or nominal equity in his property, no other assets, has provided proof of this to the lender and has made a reasonable offer of repayment
• The debtor would lose his job if made bankrupt and he has provided an income/expenditure statement with proof and has made an offer of payment which is reasonable.

Bailiffs

A lender can appoint a bailiff to collect money on their behalf, but there are different types of bailiffs and they have to be in possession of a "warrant". If it's to collect money from owed from a CCJ, then they will have a "warrant of execution".

If you owe Council Tax or money to Her Majesty's Revenue and Customers (HMRC), bailiffs can also be sent to recover the debt.

What can a bailiff do?

Well firstly you don't have to let them in and a County Court bailiff cannot force their way into your home on their first visit, but if you do let them in they can force entry into your home on future visits.

If you have an open window or an unlocked door they can enter through them as this is classed as peaceful entry.

However, they would not be able to push past you once you have opened a door or shove their foot in the door to stop you from closing it.

If you do let them in, they are allowed to take non-essential goods from your home, but they can't take things like the oven, fridge, clothes, most furniture or reasonable things that you need to do your job. They can take items that are not in your home such as your car.

Once in, they can force entry into other parts of your house, so if you have a room that is locked they can break it open.

Also, if they have gained peaceful entry, (you've let them in or they've come through an open door or window) then you can't remove them once they are inside. If you try to do so, it's classed as assault.

If you've let them in they can list goods that they have seized (even though they physically might not remove them) and get you to sign a "walking possession order" which means you can't dispose of the goods because they now belong to the bailiff.

Bailiffs seeking to recover money you owe to HMRC or unpaid magistrates' court fines or those that have a County Court possession order (if you're behind with rent or mortgage arrears) can force entry.