Martin Henderson is in a fix these days. Because of his failure to repay a loan he had taken a few years back, he has been adjudged as a bad credit case. And, in spite of much effort, he has not been able to get a loan or a mortgage. Lenders do not want to take risk by offering loans to him, and he is severely in need of money.This is not a single case. There are many who are facing bad credit and
problems resulting from it is making their lives difficult.
Failure to pay debts in most cases is unintentional. Most people are mainly concerned with immediate relief that loan or credit will offer. They do not want to mar immediate relief by thinking of repayment in future. They feel that their present income is enough to meet these extra expenditures. It surely is sufficient to meet cost of repayments, until financial condition changes for worse, and it becomes difficult to make repayments on time.
Some creditors make payment terms flexible for borrowers who are going through financial depression. Others will wait to see that customer mends his ways. If not, then they report matter to credit reference agencies. Credit reference agencies monitor all actions of borrower on his debts in their respective credit file. The main credit reference agencies are Experian and Equifax. These agencies record information about defaults on loan or mortgage.
The defaults being registered in credit file has serious repercussions for borrower. This will impede borrower from getting loans in future. County Court Judgement registered by County Courts keep record of bad credit for a period of six years. This can be reviewed if customer pays off debts within a month of judgement. A further delay can make judgement irrevocable.
Individual voluntary arrangements are another form of bad credit that disqualifies customers from getting good deals in loans and mortgages. Individual voluntary arrangements or IVAs for short is a step that saves individuals brunt of bankruptcy. The individual or official receiver, trustee or bankruptcy courts can request creditor for IVAs. Through this arrangement, debtor can sort out an arrangement for payment of debt through a well-defined plan within a period normally extending to 5 years. Since this is a legal arrangement, both debtors and creditors are bound by it. The failure by debtor at any point of time gives right to creditor to take action against other party. Even though IVAs lead to repayment of debt, it tarnishes credit of borrower. However, IVAs are suitable only for those who believe that they can pay debt in full by making small monthly repayments. If not, or if debt contracted is a sizeable figure, then bankruptcy will be only solution. Though more painful as borrower will have to lose most of his belongings, this will free customer of debts in least time (two to three years is normal time of repayment). The bankruptcy courts negotiate settlement of debts with creditors, and make payments after liquidating assets. The credit file shall however include name of borrower among bad credit cases for about 6 years.
