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What is debt?

If you require any help with debt then please feel free to call in and see the Money Advice Team, you may be required to bring the following document:

Debt Checklist

A debt is any money owed to an individual, company or organisation for funds borrowed.

Debt can be represented by a loan note, bond, mortgage or other form stating repayment terms and, if applicable, interest payments.

These different forms all imply intent to pay back an amount owed, by a specific date, which is set out in the repayment terms.

What is a problem debt?
This is when a person cannot repay what they owe or by doing so causes them real hardship.
How can I stop myself getting into debt?
Here are some ways that you can try and minimise your chances of getting into debt:

  • Keep track of how much money you have coming in and how much you have to put aside for bills, rent and food. Make sure you fill out a budget planner and keep it updated each time there is a change in your income or any other change that might affect your finances.
  • You may find it helpful to set up standing orders and direct debits to pay your bills.
  • Arrange for payments to leave your account soon after your pay date.
  • If you can, try and save some money each month as a general savings plan or to cover emergencies when they arise.
    Always shop around for the cheapest gas, electricity, telephone and insurance deals. There are many to choose from. For more information see Fuel Poverty.
  • Be careful about buying goods on credit. The interest repayments can be quite high. Also, be careful about interest free credit. It may seem a good deal but if you fail to repay the full amount before the end of the free interest period, you could find yourself paying the full interest, even if you are one day late on your payment. Try to pay at least 10% of your balance every month on your credit cards.
  • Don't just run up an overdraft without talking to your bank, you will be charged for unauthorised overdrafts.
  • Be very careful about taking out any loans. Read and familiarise yourself with the terminology. Most importantly, know the difference between secured and unsecured lending. If you take out a secured loan, you are using your house as surety and may lose it if you cannot make the loan repayments.

My debts are out of control. What can I do?
If you are in debt, you must try not to panic. It is also important to do something about the problem, because it won't just go away.
Don't ignore calls or letters from the people you owe money to (your creditors). Contact them to explain why you are having problems. Most organisations will be more helpful if you approach them first.
Priority debts
Priority debts are classified as such because the consequences of not paying them can be more serious than for other debts.

It is in your interest to use any money that you have to pay off these priority debts before you deal with any less urgent debts.

Priority DebtPossible consequence if debt not paid
Mortgage or rent arrearsYou could lose your home
Council tax arrearsA court can use bailiffs to take your goods. If, after this, you still have arrears unpaid, you can be sent to prison
Gas and electricity arrearsYou can have your supply disconnected
Court fines such as magistrates' court fines for traffic offencesThe court can use bailiffs to take your goods. If, after this, you still have arrears unpaid, you can be sent to prison
Arrears of maintenance payable to an ex-partner or childrenIf you don't pay these, a court can use bailiffs to take your goods. If, after this, you still have arrears unpaid, you can be sent to prison
Income tax or VAT arrearsYou can be sent to prison for non-payment of income tax or VAT
TV licence or TV licence arrearsYou could be fined up to £1000

This list is not exhaustive by any means. Your individual circumstances may mean that there are other necessities that you rely on. For instance, if you are disabled it may be important for you to pay for a car so that you can travel. This would make any car/transport related debts a priority for you.

You need to think very carefully about which debts you treat as the most important ones. You will need to have good reasons, as you might have to convince a court or creditors why it is reasonable for you to treat these debts as more important than others.
Non priority debts
These include:

  • Benefits overpayments
  • Credit debts such as overdrafts, loans, hire purchase, credit card accounts and catalogues
  • Water and sewage charges
  • Student loans
  • Money borrowed from friends or family
  • Payday loans
  • Parking penalties issued by local authorities

These debts are non priority because you can't be sent to prison for not paying them. However:

  • You can still be taken to court by your creditors if you do not make any offers to pay, without explaining why.
  • If you ignore a court order by continuing to not make payments, your creditors can take further action. For example, they can get another court order which allows them to send bailiffs to take your property away, to cover your debts.
  • If you have entered into a hire purchase agreement and are unable to make payments, the lender may be able to take back the goods (this can be done without a court order, depending on how much you have paid towards the goods).

How should I deal with problem debt?

Example of how you can organise your debts
Here is an example of how you could start to sort out your debt issues; broken down into different stages:

  • You will need to establish how much you owe to each creditor & the total amount that you owe. This will allow you to allocate any spare funds that you have (if any)
  • Which are your most urgent debts?
  • Complete/update a personal budget planner; do you have any money to put towards paying off urgent debts? If so, how much?
  • Once you have allocated any money that you have left to your priority debts, do you have any options for paying off your less urgent debts? How can you pay them off?
Sorting out how much you owe, and to whom
Make a list of all the people/companies that you owe money to, including the following information:

  • The name and address of the creditor
  • The account or reference number
  • A copy of the original loan agreement you signed
  • The current balance of the debt

How can I maximise my income and reduce my spending?
Check that you are getting all the income that you are entitled to. For example, you may be eligible for tax credits or for housing benefit. If you are, then you can claim these to increase your income. For more information visit the Income Maximisation page.

We can help you draw up a budget and help you increase your income if this is possible. Call 029 2087 1071 or email advicehub@cardiff.gov.uk to make an appointment to see one of our advisors.
Is there anything I should consider before paying off any debts?
Before paying off any debts that you have been asked to pay, you should familiarise yourself with the following points, to make sure that you are being treated fairly:

  • Make sure that the debt is your own debt and not the debt of a previous occupier of the home, or of someone other than yourself.
  • Check to see if you are eligible for any Grants that may be able to help with debts that you have
  • Once you have established that a debt is your own, try and negotiate with the company. Even if you can't pay the debt in full, you could try to agree a set amount to pay weekly or monthly. This will show good intention to cooperate and may help you in the future.
  • If you cannot come to an agreement with the company, they will need to get a warrant of execution from the courts before they can send in the bailiffs to remove property from your home in payment of your debt. If they already have the warrant, you should apply to the court to have it suspended.
  • If the bailiffs arrive, you do not have to let them in and they cannot generally force their way in. However, they are allowed into your property without your permission if they can enter without breaking in. This is called 'gaining peaceful entry' and includes getting in through an open window, or a closed but unlocked door.

If you are threatened by bailiffs, you should be aware of the powers that they do and don't have. Due to the complicated rules on bailiffs, it is recommended that you find out more information on them.
I require help to do things like fill out forms, can I get extra help?
If you are unable to fill out forms, then there are various services that can assist you depending on what the form is. You may wish to contact the Advice Hub or Diverse Cymru for further information.

Types of loans

What are the different types of loans?
Secured Loans
This is a loan that is tied to something a person owns, most often their home. If the loan is not repaid the lender can take possession of it and sell the property to get their money back.

Unsecured Loans
This is a loan which is not tied to something a person owns. If the loan is not repaid, the lender cannot repossess the home, an example of this would be a credit card or personal loan. You are legally obliged to pay back the loan as you agreed, and there can be serious consequences if you do not repay the loan on the terms agreed.

Payday loans
Payday loans are designed to be a short term measure aimed at those facing an immediate financial difficulty. Interest rates can be extremely high and have high financial consequences if you fail to pay them by the agreed date.

If you are looking for a loan then Cardiff and Vale Credit Union may be able to help you.

Doorstep lenders
If you can afford to borrow money but are finding it difficult to get a loan from a Bank, don't be tempted to go to an unlicensed lender (loan shark).

Some licensed lenders, commonly referred to as doorstep lenders, will consider lending to you even if your income is low, your credit rating poor, or you only need it for a short while. These are known as payday loans and the interest rates are often in the region of 1000%.

Credit unions charge much lower rates than home credit lenders. For more information on credit unions, visit the Cardiff and Vale Credit Union website.

Priority debts - Rent arrears

Is there anything I should consider when dealing with my rent arrears?
If you are in rent arrears you will need to contact your landlord and make arrangements to pay back what you owe.

You will need to ensure that:

  • You are the tenant in question.
  • Your landlord has correctly recorded all your rent payments.
  • You are receiving the correct amount of Housing Benefit you are eligible for.

Check through all the situations listed on this page to see whether you think any of them apply to you. If you think that they do, you may wish to get additional help before you contact your landlord.
Am I responsible for the arrears?
It is important to check that you are the only person responsible for paying back the arrears. The following scenarios provide examples of whether you might be wholly responsible for the rent, and arrears, or whether you might be partially responsible.

I am a sole tenant
If there's a written tenancy agreement which has your name on it, you will be responsible for both the rent and any arrears which have built up over your tenancy.

If you are the only person named on the tenancy agreement, you are called a sole tenant. You will be the only person responsible for the arrears.

If other people live with you but aren't named on the tenancy agreement, they are probably your sub tenants. This still means that you are responsible for paying all the rent and getting the money from your subtenants. If your subtenants aren't paying you what they owe, you can tell them to leave. If you are in this situation, you may need to get further advice.

There is more than one tenant in the property
If you live with other people, you should check to see what kind of tenancy you all have.

If you are up to date with your rent payments but someone else is not, you may still have to cover their payments. This depends on whether you are all on one tenancy agreement or separate agreements.

If you are all on the same tenancy or license agreement, you are called joint tenants. Each of you will be responsible for the whole of the arrears. This is known as joint and several liability. It means that if one of the other people on the tenancy agreement isn't paying their share of the rent or leaves owing money, you will be expected to cover it.

You may be able to take legal action against the other person to get back the money they owe. If you are in this situation, you should get advice about this.

If you all have separate tenancy agreements, the landlord can't force you to pay arrears owed by any of the other people. If your landlord is trying to get you to pay rent owed by someone else who is on a separate agreement, you should get further advice.

I don't have a tenancy agreement
You may not be able to check whose name is on the tenancy agreement because there has never been a written agreement. However, if you agreed to pay a landlord rent, this usually counts as a tenancy agreement and you will have to pay back any rent you owe but it may be harder to prove what you have agreed to pay the landlord and how much you owe them. It may also be harder to prove if someone else who lives in the same property as you owes the money and not you.

If you are renting from a private landlord and have a weekly tenancy, your landlord must provide a rent book or similar document. Your landlord is committing a criminal offence if they fail to do this. However, if you rent from a private landlord and have any other type of tenancy such as fixed-term or monthly, you don't have the right to a rent book.

In Wales (and England) if you have an assured shorthold tenancy which was created on or after 28 February 1997, you can ask your landlord to give you the basic terms of the agreement in writing. If you ask for this in writing, your landlord must provide it within 28 days.

If there's never been a written tenancy agreement between you and your landlord and you are not sure how much rent you owe them, you should get help from an experienced housing adviser at the Housing Options Centre. You can also visit the Housing Rights website for more information.

I took over the tenancy from someone else
If you have taken over the tenancy from someone else, you should check you are not being charged for any rent owed from before you took over.

Taking over a tenancy from someone else is called succession.

An example of succession would be:

if you have lived (long term) in a council flat with a relative who is the only person named on the tenancy agreement. When this person passed away you might have become responsible for the tenancy. If this person was in rent arrears you would not be responsible for those that were owed before you took over the tenancy, because at this point you were not the tenant.
Do I owe the correct amount?
Check that the amount the landlord says you owe agrees with your own records. Look at your bank statements, receipts, rent book or rent card. Check that all the rent payments you have made have been recorded and the amounts have been added up correctly.

Ask your landlord for a statement of your rent account if:

  • You haven't kept a record of your rent payments
  • You haven't got a rent book or rent card
  • Your rent book or rent card is unclear

Check what's included in the rent you are paying. Your landlord is allowed to include things like water, service charges, heating and lighting in the rent. If the rent you owe includes charges like these, you will have to pay them.

However, there are rules about how much a landlord can charge you for gas and electricity.

Can I claim/increase my Housing Benefit/Universal Credit and increase my income?
If you are not receiving any Housing Benefit or housing costs element of Universal Credit, or you are not receiving the full amount of Housing Benefit/ Universal Credit, you may wish to see our Income Maximisation page for further information on how to check you are receiving the amount of benefits that you are entitled to.
Paying off my rent arrears
If you have fallen behind with your rent payments, you should take action quickly to deal with the situation.

If you don't find a way to pay back what you owe, this could lead to lots of problems. You could lose your home and have problems finding somewhere else to live.

You might not be able to rely on Cardiff Council to re-house you because you may be considered 'intentionally homeless'. You might find it hard to get credit or borrow money in the future.

For more information about being homeless call Connect to Cardiff or visit the Housing Options Centre.

Where should I start?
You will need to contact your landlord as soon as possible to try and make arrangements to pay back what you owe. Before you do this:

Contact your landlord to check that the amount you are being asked to pay back is right

Check that you are getting all the income you can. See income maximisation.

If you need help with contacting your landlord then contact Connect to Cardiff or visit the Advice Hub in Central Library for help.

Is there anything else I can do to help pay off with my rent arrears?
If there are people living with you, make sure they know about your problems with the rent and are helping you out if they can. For example, if you have adult children living with you, ask them to contribute something to help you pay off the arrears. Explain that you could all lose your home if you can't pay back what you owe.

Are there any schemes that can help me pay off my rent arrears?
There are schemes that can help you to deal with:

  • Rent arrears
  • Council tax arrears
  • Utilities bills arrears

For more information on these schemes visit our page on Grants/Extra Help and Tips.

I am claiming benefits; does this give me more options?

If you are getting certain benefits, you may be able to ask for an amount to be deducted from your payments and paid directly to your landlord. This is called a third party deduction.

Third party deductions can be made from the following benefits:

  • Income Support
  • Pension Credit
  • Income-based Jobseeker's Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)

Getting a third party deduction would mean your rent arrears would be paid off automatically, by taking a small amount out of your weekly benefit, and you would not have to worry about making extra payments to the landlord yourself.
What should I say when I contact my landlord?
Once you have checked that what you are being asked to pay back is right, you should get in touch with your landlord. Explain why you have got behind with your rent payments.

If you can pay off the arrears in full, do this as soon as possible. Make sure you get a receipt from your landlord in writing.

What happens if I can't repay the arrears in full?
If you can't pay off your arrears in full, you should ask for more time to pay them back. You can suggest that you will pay back extra on top of your rent each week/month over a certain period of time, until the arrears are paid off. A landlord may agree to this rather than end your tenancy because they want to get back the money you owe.

If your landlord is Cardiff Council or a housing association, then the policies for dealing with rent arrears will be different to private tenancies. Certain rules have to be followed before you are taken to court. These include agreeing a reasonable repayment plan that you can afford.

It is important that you agree a repayment plan that you can afford to stick to. If you don't stick to the plan, your landlord will probably take you to court and try to evict you.

Private landlords may be tougher and expect payment more quickly. However, they still must not harass you or take other action like cutting off your gas or electric to try and force you to pay quickly. If your landlord threatens or bullies you in any way, get help from an expert housing adviser.

You can try and come to an arrangement to pay off your rent arrears with your landlord at any time, even if you have already received papers saying that your landlord is taking you to court.

How much should I agree to pay back?
To work out how much you can afford to pay back your landlord, you will need to take a good look at your household income and expenditure. Completing a budgeting sheet may help prove to your landlord the amounts that you can and cannot afford.

Find out more about budgeting here.

If you work out that you don't have enough money to pay back your rent arrears, you should get help from an experienced debt adviser.

What if my landlord doesn't agree with my repayment plan?
If your landlord won't agree the repayment plan you have offered, pay what you have offered anyway. This may make a difference if your landlord takes you to court.

Any agreement with your landlord should be written down and signed by both of you.

What if I don't keep to my repayment plan?
If you have agreed a repayment plan with your landlord but you have not kept to it, they might take legal action to evict you.

You could try going back to your landlord and asking them to give you a second chance.

If there is a court hearing, you may be able to persuade the court to let you stay on in the property, as long as you stick to the repayment plan in the future.

Can I be evicted even if I pay off the arrears?
In some cases, you could still be evicted even if you pay back the money you owe. This can happen if you have certain types of tenancy, for example an assured shorthold tenancy. Most tenants of private landlords are assured shorthold tenants.

To do this, they will need to follow a procedure which involves getting a court order. They can't make you leave your home without getting a court order first, although in some cases you may want to leave before they do this.

If your landlord tries to force you to leave your home without getting a court order first, this is against the law.

If you have an assured shorthold tenancy, it can be quite easy for your landlord to evict you. They can usually use a procedure called the accelerated possession procedure. This means that your landlord can evict you without reason, as long as they have given you two months notice. If you don't leave the property by the time the notice runs out, they will need to get a court order, but in most cases, the court will grant an order without there even needing to be a hearing. You will be told to leave the property no longer than 14 days after the order is granted.
I am being taken to court for rent arrears. What can I do?
If you have rent arrears, your landlord may try and evict you. This is called seeking possession. To do this, in most cases, they will need to follow a procedure which involves getting a court order. They can't make you leave your home without going to court first. If they do make you leave without taking you to court first, this is against the law.

In some cases, even though they take you to court to evict you, they may agree to let you stay in the property as long as you agree to pay back the money you owe and you don't fall behind with your rent again.

The procedure your landlord must follow if they want to evict you for rent arrears is:

  • A pre action protocol (only applies to social housing landlords, such as local authorities and housing associations)
  • Send you a warning, called a notice of seeking possession or a notice to quit
  • Send you court papers
  • Get a court order called a possession order
  • Get a warrant of possession
  • Get a notice of eviction sent to you by bailiffs

Private landlords may be able to use a quicker procedure to evict you from your home.

Mortgage arrears

Where should I begin?
As with all debt problems, it is very useful to know where you are with your finances before you start negotiating repayments. If you haven't already, complete a budget sheet. This will allow you to see all of your money coming in and enable you to compare it to that going out. This should allow you to see the areas where you might be able to reduce your expenditure. For more information see Money Management.

It is also worth checking to see if you are eligible to claim for any benefits that you haven't already. This may increase your income and allow you to repay any debts owed. For more information on this, visit Income Maximisation.

If any correspondence from your lender seems to be urgent and you don't know what to do, then you should get advice from an experienced advisor.
Are there any other agencies that can help me?
Mortgage arrears can be a complex matter. If you are in arrears with your mortgage payments you should contact your lender as soon as you can to explain your situation, and the reason for the delay in your payments.

If you need further help then you should contact the Money Advice Trust and the Citizens Advice Bureau.

Council Tax arrears

Can I reduce my bill?
There are certain circumstances whereby if you meet the requirements then you can qualify for a discount on your council tax bill.

For more information see Council Tax discounts.
What if I can't pay?
If you can't pay your council tax in the normal 10 months instalments, then you may be able to pay it at different frequencies (such as weekly). If you think that this may help you budgeting then you could call Connect to Cardiff on 029 2087 2087 to arrange paying at a different frequency or visit the Advice Hub for more information.

If you can't afford to pay your council tax then you should visit our Budgeting page. If, having done this, you still cannot afford to pay your council tax then you may be eligible for Council Tax Reduction. For more information on this see Income Maximisation.

The important thing to remember is that the consequences of not paying council tax are worse than some other debts. For more information see our information on Priority Debts and Non Priority Debts.
What is a liability order?
This is when someone who is liable for council tax doesn't pay, or doesn't keep to arrangements made to pay. The Magistrates' Court will agree a Liability Order for the amount that you owe plus the costs for the court.

The only way that that the court will not agree a liability order is if:

  • The council has not gone through the correct procedures
  • You have paid the total amount owed
  • The name on the summons is incorrect
  • It is more than 6 years since the council sent you a demand notice to pay the bill

If one of these applies to you, tell Cardiff Council immediately (this can be done through Connect to Cardiff) and go to the court hearing. You will be given 14 days notice of the court hearing. You can then ask for the court to adjourn the liability order hearing if you have appealed to the Valuation Tribunal because:

  • You don't believe that you are legally responsible for the bill
  • You don't agree with the amount on the bill
What can I do once I have a liability order?
Once a liability order is in place, the Council Tax Department can make you pay council tax in a number of ways (see below).

Attachment of earnings orderA fixed amount, determined by how much you earn, that is deducted from your wages until the debt is repaid.
Enforcement Agents (Bailiffs)Enforcement Agents can visit your home and take goods which can be sold to pay off your debt. For more information see the Citizens Advice Bureau page on Enforcement Agents.
Charging orderWhen a debt is over £1000 a county court order can be gained. This means the debt is secured on your home.
Deductions from BenefitsWeekly deductions of £3.70 can be made from a relevant state benefit that is in payment to a claimant, such as Income Support (IS), Employment and Support Allowance (ESA) and Job Seekers Allowance (JSA).
BankruptcyWhen a debt is over £5000.
ImprisonmentWhen the council has tried using enforcement agents and you have still not paid what you owe in full, the Magistrates' Court can provide an order that sends you to prison. There must be a court hearing beforehand, where you will be able to explain why you haven't paid. In exceptional circumstances the debt can be written off by the court, but normally you will be ordered to pay off a certain amount each month and if you don't you can then be sent to prison.

Note: that it is not too late for you to arrange to pay once you have been given a liability order.

For more information on Council Tax arrears:
Visit the Advice Hub
Visit the Citizens Advice Bureau web page on Council Tax
Visit the Money Advice Trust website
Visit the National Debtline website or call 0808 808 4000

Gas and electricity arrears

I am in arrears with my utilities payments, what should I do?
If you are in arrears with utilities then you are at risk of having your gas and electricity supplies cut off.

Firstly, you need to check that you are the person named on the bill. If you are not, then you may not be responsible for the arrears. If this is the case then you will need to contact your energy supplier to explain this.
How can I make arrangements to pay back my arrears?
If you speak to the company, then you might be able to organise paying it back at a convenient frequency (weekly, monthly, 4 weekly, etc.) until you have paid off the arrears. If you are doing this, make sure you suggest a payment plan that you can stick to. See our page on Budgeting for more information.
I cannot afford to pay back my arrears, what can I do?
See our page on Income Maximisation to see if you can increase your income, and Budgeting to see if you can save money.

If you still cannot afford to pay back your arrears then you should check our information on Grants/Extra Help & Tips to see whether there are any other schemes that can help you with your arrears.

For more information on gas and electricity arrears, visit our page on Fuel Poverty.
How can I avoid having my fuel cut off?
You must continue to pay for the fuel that you are using, whilst paying off the fuel arrears.

  • Paying by instalments can help you to pay off any debts, and means that you don't need to think about them all the time. This can also help your budgeting.
  • Keeping a budgeting sheet can help you to track your spending and identify where you can make savings. It can allow you to see the easiest way to pay and how often you can manage the payments.
  • Getting a prepayment meter.
  • Direct payments from benefits.

For more information see Fuel Poverty.
My provider still wants to cut off my energy, what can I do?
You should get advice from:

  • Cardiff Council's Advice Hub
  • Citizens Advice Bureau
  • Consumer Focus

For more information, see our pages on Fuel Poverty.

Magistrates court fines

If you need help regarding Magistrates court fines then you should seek help from an experienced adviser.

If you want to pay a Magistrates court fine then you can do so on Gov.uk.

Parking penalty charges

If you have Parking penalty charges then you should seek advice from an experienced adviser.

Maintenance arrears

You may wish to contact an experienced adviser if you have Maintenance arrears.

Benefit overpayments

Department for Work and Pensions overpayments
You may be told by Department for Work and Pensions that you have been overpaid a benefit, and that they want you to pay this back.

The DWP must tell you if the overpayment can be recovered from you and why. If you do not agree that you owe the money, you can appeal. The law on overpayments is complicated, so before deciding whether to appeal contact the Advice Hub for more information.

The DWP can make deductions from most types of benefits to collect overpayments, except Child Benefit. There are maximum weekly amounts that can be taken. If this will cause you hardship, contact the DWP and ask them to take less. Use your budget summary and explain why the payments will cause you hardship.

In some circumstances, the DWP will agree to 'write-off' the overpayment if your repayments are causing you hardship. Your local councillor should be able to help you with this.
Housing Benefit overpayments
Housing Benefits overpayments can be created if a change occurs to your claim that took effect in the past.

Housing benefit overpayments are usually paid back through ongoing entitlement, in cases where housing benefit is still to be awarded. Depending on your income and the nature of the overpayment, it can be claimed back at 3 different rates. It can also be claimed back if your claim for housing benefit has ended; in this instance, proceedings will need to go through court to obtain the required powers.

If you are struggling to pay back the overpayment amounts then you may wish to put in a Hardship Request. You will have to complete a budgeting sheet to prove that you cannot pay back what you owe at that rate.

Tax Credit overpayments

If you have been overpaid Child Tax Credit or Working Tax Credit and do not agree with the decision or the amounts are incorrect, you may be able to appeal against HM Revenues and Customs' decision.

How the overpayment is recovered?
Overpayments can be recovered in different ways, including deductions from your ongoing tax credits claim, by reducing your tax code or even though the same enforcement methods as a tax debt. In some cases, you can also agree in writing for deductions to be made from your benefits.

HMRC may agree not to recover the overpayment if it is caused by a mistake by them and you have followed the rules for reporting any mistakes you spot and changes in your circumstances.
What happens if I cannot afford the repayments?
If paying the tax credits back will cause you hardship, you may be able to reduce the amount at which you pay it back. You should speak to HMRC and ask for time to pay it back at a rate you can afford. Ask a copy of their code of practice 'What happens if we have paid you too much tax credit?'.

In cases of extreme hardship, or if there is evidence of mental-health problems, they can consider writing off all or part of the debt.

Tax debts

If you have arrears with income tax, National Insurance or VAT, you need to make an arrangement to pay as soon as possible. Treat tax as priority debt, as HM Revenue and Customs have various ways to make you pay.

Call National Debtline on 0808 808 4000.

What happens if I am self employed?
If you are self-employed, your tax affairs could be quite complicated and you need professional tax advice. If you can't afford this because you are on low income, you could contact Tax Aid

Hire purchase or conditional sale

You can buy goods on all sorts of different credit agreements. With most credit you own the goods straight away and only owe the money to the creditor. The creditor cannot ask you to return the goods you bought with most types of credit. With hire-purchase or conditional-sale agreements, you do not own the goods until you have paid the last instalment. The most common type of goods on hire-purchase agreements are cars.

Can my lender take back the goods?
If you fall behind with your payments, the lender may be able to ask for the goods to be returned and then sell them to reduce the debt. You cannot sell the goods yourself without the lender's permission.
Have you paid less than a third of the debt?
If you fall behind with payments, the lender may be able to repossess the goods. They do not need to go to court first if you have paid less than a third of the debt. You can also return the goods.
Have you paid off more than a third of the debt?
If you have paid more than one third of the total owing, the creditor must go to court to ask for the goods to be returned. They cannot just come around and remove them.
Returning the goods voluntarily
You may be able to return the goods by writing to your lender to end your agreement. This is only possible if your lender has not already ended your agreement. You will owe up to half the agreement, any arrears and reasonable charges if the goods are damaged. If you have already paid half of the contractual payments, you will not usually be asked to pay anything more. Once you have returned the goods, you can treat any debt you still owe as a non-priority debt.
Keeping the goods
If it important for you to keep the goods, you should include the payments in the outgoings section of your personal budget sheet and treat this as a priority and not a non-priority debt. If you do this, be prepared to explain to creditors why you need the goods (for example, you are disabled and need the car to get around, or you live in a rural area and need the car for work).

If your lender will not agree to this, you may be able to apply to the county court for a 'time order'. If this is granted, you may be able to keep your goods and make smaller reduced payments to your lender.
What kind of agreement do you have?
If you have a hire-purchase or conditional-sale type of credit agreement, it should state this clearly. This information only covers hire-purchase or conditional-sale agreements which come under the Consumer Credit Act. Check your agreement if you are not sure what type of agreement you have.

Non Priority Debts

What are the options for dealing with my non-priority debts?

Pro rata offers of payment
You can work out offers of payment based on 'pro-rata distribution' of your available income. This means you offer all your creditors a fair share of what you can afford to pay. You also need to aks that any interest and charges are frozen.
Free debt management plan (DMP)
This means you make one payment every month to cover all your non-priority debts. This will be divided up and sent to your creditors for you. You will not have to negotiate direct with your creditors to accept your offers and freeze the interest.

If your debts are with the same creditors, there are special rules.
Individual voluntary agreements
There is an alternate to bankruptcy called an individual voluntary arrangement (IVA). This is a formal arrangement to pay an agreed amount off your debts over a shorter period, such as five years. The rest of your debts are written off.

The IVA will be set up by an insolvency practitioner whose fees can be very high. Creditor can stop the IVA going ahead by voting against it. It is usually only an option if you have a lot of money available every month to pay your creditors or you have a lump sum or assets that you can include. You need to be careful if you own home as you may risk losing it.
Administration orders
If you have a county-court judgement, you might be able to apply for an administration order. This is a way of putting all your debts together and making one monthly payment into the court. The court then shares it among your creditors. The total of the debts must be no more than £5000. your creditors can't take any further action against you if you have an administration order, as long as you keep up the monthly payments.

You may need helping filling in the application form as local courts deal with the administration orders differently.
Can I offer a lump sum to clear my debts?
If you have a lump sum that is less than the full balance you owe on your debts, you can ask your creditors to accept the payment and write off the rest off the debt. This may be an option if you have come into some money or have some savings you can use. Creditors do not have to accept an offer in 'full and final statement' but if your circumstances are unlikely to improve, they may agree to your offer. Make sure that any offer accepted is confirmed in writing by the creditor.
'Consolidating your debts' into a new loan
You need to think very carefully before deciding to add all your debts together and pay them off with a new loan. This may not be the best option for you, especially if your lender wants to secure the loan on your home. This means you could have your home repossessed if you do not keep up with the payments. Before agreeing to a consolidation loan, seek advice.

What if I have no money left to pay my creditors?

No payments or token payments
After paying your outgoings and making arrangements to pay your priority debts, there may be nothing left to pay other creditors. If you have nothing left, say so. Show your creditors by sending them your budget summary and a letter to back this up. Ask your creditors to hold action until your circumstances improve. This is called asking for a 'moratorium'. Or offer a token payment of £1 a month to each creditor instead.
Debt relief order
You may be able to apply for a debt relief order (DRO). DROs can be an alternative to bankruptcy and are cheaper to apply for.

You may qualify if:

  • You owe under £15000 in total
  • You can't afford to pay more than £50 a month to your creditors; and
  • You have assets of less than £300 and a car worth less than £1000

If you get a DRO, your debts are written off after 12 months. You will need help from an approved advice agency, citizens advice bureau or National Debtline, to fill in an online application. You will have to pay a fee to the Insolvency Service to make the application.
Bankruptcy can be an option if you owe a lot of money, have no assets, and can see no way of ever paying the debts off. Creditors are able to make people bankrupt but this is rare. You must owe £750 or more to that creditor before they can make you bankrupt.

You can make yourself bankrupt but the fees are high. Once you are bankrupt, your creditors can usually take no further action against you but going bankrupt can have important consequences. For example, if you own your home and it is worth more than your mortgage, your home could be sold as an asset.

Your bankruptcy will normally be last for up to one year. Usually debts that have not been paid are then written off and you are 'discharged' from the bankruptcy. You may still have to make monthly payments for a total of three years under the terms of your bankruptcy.
Will my creditors write off my debts?
If you have no money for creditors and no assets, creditors may agree to write off your debts. This is very rare but may be an option if your circumstances are extremely difficult due to illness, age, or a death in the family. You will need to provide evidence to your creditors of your circumstances.

Dealing with your creditors

Checking the name on the agreement
Only the person who signs an agreement is responsible for the debt. A husband and wife are not responsible for each other's debt unless they both sign the agreement.

If you take out an agreement jointly with another person, you are each responsible for the whole debt and not just part of it. This is called joint and several liability. Make sure the creditor knows that someone else is also responsible.

Check your credit agreement carefully. If you don't understand the terms or want to check that the agreement is in the correct format and that you are legally responsible for the debt contact local trading standards department.
Under 18s
People under 18 can only be made to pay for 'essential goods and services' bought on credit, such as fuel supplies. If you are under 18 and have an agreement for non-essential goods or services, you cannot be taken to court if you owe money for them. However, it is not always clear which things are 'essential'. The court can decide this for each case. Generally, parents are not responsible for their children's debts unless they have signed a guarantee.
Creditors may ask for a guarantor before agreeing to lend money. This means that if the person who has borrowed the money does not pay it back, the guarantor will be asked to pay.


Debts have two parts - the money borrowed and the interest. Interest is part of the charge for lending you the money. Debts have interest added in different ways.

  • Fixed-term loans. Interest is worked out at the beginning of your loan and included in your monthly payments. Sometimes, if you miss a payment, extra interest, called 'default interest' is charged. Ask the creditor to freeze any default interest they are adding.
  • Revolving credit agreements. These cover credit cards, bank overdrafts and some loan agreements. Interest is added to your account on a daily or monthly basis. This means your debt grows unless the payments you make are higher than the interest being added. The company may also change the interest rates and add extra charges. Ask creditor to freeze all the interest and charges.

To find out if interest is still being added to any of your debts, check your agreement for details.

I am still paying interest
Your debt will continue to grow if your new monthly offer of payment to the creditor is less than the interest being added. Ask the creditor to stop charging interest. The creditor may agree to this for a limited period then start charging interest again. Ask for regular statements and check them. When a creditor accepts your offer, if they do not say they have frozen the interest, you should check this with them again. The creditor may also try to add administration and late-payments charges. Ask them not to charge these ('waive' them).
What if my creditor refuses to freeze the interest?
Write to them again. If any of your other creditors have agreed to freeze the interest, point this out.
Copies of credit arrangements and account statements
You have the right to ask for a copy of your credit agreement and an account statement. You may have lost your original agreement and need to check the terms such as ask interest rate write to the creditor and ask for a copy of the agreement under the Consumer Credit Act 1974, sections 77-78. The fee for getting this information is £1 for the agreement and £1 for the account statement. However, if you ask for both at the same time, you only pay £1. If your creditor does not send you a copy of your agreement within 12 working ways, the are not allowed to take further action against you until they send you the agreement. If the creditor takes you to court, you can point out they have failed to give you copy of the agreement.

If you have taken out a credit agreement over the internet, these rules may not apply to you.

You can also write to your lender and ask that they send you all the information they hold on computer to do with your account. Make this request under the Data Protection Acts 1984 and 1998 and refer to the 'right of subject access' under the acts. List all your addresses for the past six years. Your lender has 40 days to do this.

Your lender can charge you a fee of up to £10 for supplying the information.

If your lender does not keep to this request, you should complain to the Information Commissioner's Office.
Claims management companies
There are lots of companies out there who say they can get your debts written off for you, or get compensation for you by claiming that your credit agreements cannot be enforced. Be very careful! Most of these firms charge you up-front fees for each agreement they agree to check. However, there is no guarantee that they will be successful. In most cases you will not get your money back. Before signing up a claims management company, seek advice.

Making payments - ways to pay

If you have made arrangements with your creditors, you will need a convenient way to pay. There are several options.

  • Open a basic bank account which offers free standing orders. Standing orders are regular payments you ask your bank or building society to make for you.
  • Ask your creditors for paying-in book. Make sure there are no fees to pay.
  • Some creditors accept payments through their website. Check with your lender.
  • Check whether you have a PayPoint or PayZone outlet at a local shop and if your creditors are part of a scheme. For details of your nearest PayPoint see www.paypoint.co.uk. For PayZone see www.payzone.co.uk.
  • If collectors call weekly at your home and you are offering a small amount, ask them to call every month instead, but make sure you budget in order to make payments.
  • You may be able to pay at creditor's local office or retail outlet, such as a shop.
  • If you send cheques or postal orders, make sure you send your reference number, and a covering note.
  • Keep record of all payments you make.

Reviewing your offers of payment
Your creditors will often write to you after you've made an agreement, perhaps every three or six months, to see if you can now afford to pay more. If you can't increase your payments, write and tell them, enclosing a copy of your budget summary.
What if the creditor refuses my offer?
Sometimes a creditor will refuse to accept the offer of payment you have made on your budget summary. They may demand more than you can afford. Sometimes they refuse to freeze the interest. If a creditor accepts your offer, double-check that they have frozen the interest if they do not state this in the letter. Don't give up. You can usually persuade creditors to accept you offer of payment by using the following steps.

  • Start paying the amount you have offered anyway as a gesture of goodwill.
  • Write to the creditor again and ask them to reconsider. Tell them your offer is reasonable and all you can afford.
  • If some of your creditors have accepted your offer of payment, and frozen the interest, write to the creditors who have refused and tell them this.
  • If a collector calls for your payment, you should not let them persuade you to pay more than the amount you have offered. Otherwise, you will not be able to make the payments you have agreed with your other creditors, particularly your priority debts.
  • Most creditors are members of a trade association and have agreed to a code of practice. The code usually says creditors should be sympathetic in cases of genuine difficulty.
  • Creditors may ask you to fill their own budgeting form instead. Ask them to accept your own budget summary as this has all the information they need. You can also tell them that the layout of your budget summary has been agreed with creditor organisations.

What if my creditors ask for proof?
Sometimes creditors may ask for extra information or 'proof' such as wage slips or letters from other creditors. You may want to help with reasonable requests but if the creditor wants proof of your bills, point out this would not be asked for by the court.
What if I can't afford to pay more?
The offers of payment in your summary budget are fair to all your creditors and the most you can afford. If you allow one creditor to persuade you to pay more, you will not have enough money for your outgoings and other creditors.

What can I do if creditors harass me?

If you do not pay, your creditors are allowed to keep reminding you from time to time but they must not act illegally. If they threaten or harass you to try and make you pay, they may be committing an offence under the Consumer Protection from Unfair Trading Regulations 2008.

The office of Fair Trading (OFT) has issued Debt Collection Guidance. It sets out the kind of behaviour which the OFT will treat as 'unfair business practices'. If an organisation breaks these guidelines, it may call into question their fitness to hold a consumer credit licence.

Collection agencies

The creditor may pass or sell your debt on to a collection agency. Don't worry. A creditor agency has no greater powers than the creditor. They are not bailiffs and have no rights to come into your home. If you feel a collection agency is behaving unfairly.

You should negotiate payments with the collection agency in the same way as your other creditors. Some collection agencies may try to charge you extra fees for collecting the debt from you. You may be able to complain about this.

Loan sharks
A loan shark is someone who lends money but does not have a legal licence to do so. They often use violence and threats to make people pay and usually there is no written agreement. If you are worried about an illegal money lender, you can contact the 'Stop Loan Sharks' helpline - 0300 1233311.

What if I have a complaint about my credit agreement?

You have a right to complain to the Financial Ombudsman Service about how your lender or debt-collection agency has dealt with your account. You will have to follow your lender's complaints procedure first but from July 2012, your lender has only one opportunity to resolve your complaint before you can ask the Ombudsman to look at it. To make a complaint to Ombudsman you need to fill in their complaints form. You can either do this over the phone or download the form from their website.

You may also be able to ask the county court to look at the terms of your agreement and decide if there is an 'unfair relationship' between you and your lender. This could lead to the court changing the terms of the agreement and even reducing the balance or ordering your lender to pay the loan payments back to you.

What if I already have county-court judgement?

You should include this debt with your non-priority debts and work out an offer of payment in the same way.

If this is less than the amount the court has ordered you to pay, you may need to apply to the court to reduce the amount. This will mean you are treating all your creditors fairly and you are not paying one creditor more than you can afford.

Debts with a bank - overdrafts, loans and credit cards

Many people use their current account with a bank or building society to have their wages paid into, and to pay household bills. This can cause problems if you have a number of debts, and your current account becomes overdrawn.

With an overdraft you pay interest and charges on the amount owed. If you have a loan with the bank or building society account, the full monthly instalment will usually be taken from your current account too. This may mean that you do not then have enough money to pay priority debts such as mortgage, rent, council tax, gas or electricity.

You need to be very careful in dealing with debts to your bank. Some banks or building societies will react by taking all the money in your account to clear the overdraft or loan. They can also try to do this if you have a credit-card debt with your bank. It is called the 'right of set-off'. You should consider opening an account elsewhere to have your wages paid into before negotiating with the bank just in case. Do this immediately if the bank or building society does not agree to your offer.

The Lending Code and the right of set-off
The Lending Code has guidance for banks and building societies when they are applying the right of set-off and the customer is in financial difficulties. The code says, if your bank or building society uses the right of set-off, you should be left with enough money to meet your reasonable day-to-day living expenses and priority debts.
See Lending Standards Board.

Opening a bank account

You may have difficulty opening bank account if you have debts on your credit file. However, opening a basic bank account should not normally involve a credit check. These accounts allow you to have wages or benefits paid in and take cash out. Some accounts let you have direct debits and standing orders.

You are not usually allowed cheque books, cheque guarantee cards or an overdraft. Shop around the high-street bank and building societies.

If you are on benefits and don't want a basic bank account, you can choose a post office 'card account', you can have your benefits (including tax credits and pensions) paid into this account and can take money out at a post office counter.

Does your bank charge you a fee for a 'packaged' account?
Some banks charge you a monthly or annual fee to have a particular account with them, because they offer extra benefits such as mobile phone insurance. Check if you are paying a fee for your account and think about whether the benefits you receive are really necessary, or if you could get them cheaper elsewhere.

Interest and charges
If you are trying to make an arrangement to repay an overdraft, you should ask the bank or building society to stop the charges an interest, so that the amount you pay reduces the debt. If the staff at your local branch is not able to agree to this, contact the regional or head office of the bank or building society and ask them to agree to do so. Point out that the Lending Code says banks 'should be sympathetic and positive when considering a customer's financial difficulties'.

The Lending Code
The Lending Code sets out how banks, building societies and credit-card providers should treat you when you have financial problems. Under the code, your lender should:

  • Look at your options with you;
  • Look at your income and outgoings and other debts;
  • Try to agree a debt repayment plan with you; and
  • Make sure you have enough money to cover your day-to-day expenses and pay your priority debts.

Voluntary charges on your home
If you have a large overdraft or a personal or business loan, you may be asked to agree a voluntary legal charge on your home in return for reduced payments. This would mean that the debt would be secured on your home and you could then lose your home if you didn't keep up the payments. Banks will sometimes ask you to agree to a legal charge which means any future borrowing or overdraft you have with the bank is also secured on your home.

Before you agree on a voluntary charge

If you are asked to agree to a voluntary legal charge either by one of your creditors, or if your partner asks you to sign an agreement to a legal charge on your home, you must get legal advice first.

Secured overdrafts
You may have a bank overdraft secured on your home. The interest charges can be high, with no fixed monthly instalment to pay.

If the bank takes you to court, it may be difficult to suspend a possession order to pay off the overdraft in instalments.

Beware of consolidation loans
Beware of advertisements in newspapers and on television offering loans to clear all your debts (often called 'consolidation loans'). They can be very expensive and will put your home at risk.

Banks should have a complaint procedure under the Lending Code which they should make public. If you have a complaint, you need to follow this procedure. If you do not feel they have dealt with your complaint satisfactorily, you may be able to complain further to the Financial Ombudsman Service. They can only deal with certain types of complaints. For information, contact Financial Ombudsman Service directly.

Charge cards

You may have a debt on a charge card such as American Express, where you have to pay the full balance off each month rather than in instalments as with a credit card. It can be more difficult to negotiate reduced offers of payment on charge cards as they are not ordinary credit agreements. You should still include them with your other credit debts. If the company takes further action, this should be in the county court if you owe under £25000. If you owe more than £25000 the creditor can sue you in the High Court. The initial procedure is the same but extra interest can be added on to judgements in the High Court.

Payday loans

A pay day loan is a cash advance on your wages which is paid back to the loan company when you next get paid by your employer. Many people use these loans to help them if they have run out of money before their next payday. The interest rates on these types of loans can be very high. Charges will also be added if your cannot pay the loan back on payday. This means that the debt can build up so you end up owing a lot more than you borrowed.

A payday loan is a non-priority debt but it can be difficult to deal with as you may have given what is called a 'continuous payment authority' to the loan company. This means that you have given permission to the loan company to take money from your bank account. You may not realise you have given this permission, but you can get a continuous payment authority stopped by telling the bank or the payday loan company.

Catalogue debts

You may have a debt with a catalogue company. You should treat this as a non-priority debt in the same way as your other non-priority debts. Goods ordered from a catalogue belong to you and cannot be taken back if you do not pay. If you have a dispute with the company or an agent about how much you owe, seek advice.

Signing a credit agreement
Although catalogue companies should give you a credit agreement (under the terms of Consumer Credit Act 1974), this does not always happen. In this case, the county court may not be able to enforce the agreement if you started using the catalogue before 6 April 2007. After this date, you can still ask the court to decide if the agreement can be enforced or not. If you can't remember signing an agreement when you received the catalogue, this may apply to you.

Personal debts to friends and family

You may owe money to friends and family. You should usually treat these debts the same as ordinary non-priority debts and make offers of payment in the same way.
You may be able to agree to make no payments until your circumstances improve so you can pay off your other creditors faster. Sometimes you may want to make higher payments on a personal debt because lending you the money has caused hardship to someone you know or your relationship may suffer if you don't. This can be difficult, as your other creditors may be unhappy if you are paying more on a personal debt than this strictly 'fair'. You need to explain the reasons to your other creditors and point out, for example, that if you pay off the personal debt quickly, you will be able to pay more to everyone else.

Water rates arrears

If you have water-rates arrears, you should include your current rates in the outgoings section of your personal budget sheet.
This is because water is an ongoing bill and you need to make sure you do not build up more arrears. Your water company should allow you to pay by weekly, fortnightly or monthly instalments. Contact your water company to ask them for a payment agreement. If you have arrears as well, you can use your budget summary to make an offer of repayment that you can afford.

Can I be disconnected?
You cannot be disconnected for water-rates debt. This is why this debt is non-priority debt.

If the water company threatens to disconnect you for owing them money, complain to the Consumer Council for Water, who deal with complaints on behalf of the water industry regulator, Ofwat.
If you have a complaint about the way the water company is dealing with your debt, contact the Customer Council for Water. If the water company does not keep the council's decision, the council can refer your complaint to Ofwat, the regulatory organisation for water. Ofwat guidelines say the company should take account of your circumstances when making an arrangement to pay. For the number for your regional Customer Council for Water, look in your local phone book or see Customer Council for Water.

Some water companies threaten to disconnect a property because 'they think the property is empty'. Make sure you keep in touch with the company as they may try to do this if nobody has answered their letters for some time. If your water company has threatened to disconnect your supply, ring them and make sure that they understand that you are still in the property and they cannot disconnect the supply.
What if I don't make an arrangement to pay the arrears?
If you do not agree a repayment arrangement, the water company can issue a county-court claim against you. You can make an offer of payment by filling in the reply form to the claim and sending this back to your water company within the time limit. If the court agrees with your offer, you can pay the debt off in instalments.

Direct payments

If you get Income Support, Pension Credit, income-based Jobseeker's Allowance or income-related Employment and Support Allowance, you can ask the Department for Work and Pensions to take an amount from your benefit each week to cover current water rates and a standard amount towards what you owe. The DWP will pay the money direct to the water company. This is called 'water direct'.

What if my creditors take court action?

Many people are frightened of courts especially when they feel guilty because they owe money. But the county court is not there to judge as guilty or innocent, only to settle disputes about the money owed, and how to repay it. The court is not there to serve the interest of creditors alone. Under court rules on 'pre-action conduct', the court is keen to see you come to an arrangement with your creditors without court action. If court action is taken, you will not usually have to go to court hearing. Most of the procedure is done through the post.

  • Your creditor should send you a letter before they start court action telling you how to pay and how to contact them to discuss your repayment options. They should also send you a list of free, independent advice agencies you can contact.
  • The rules allow you to ask your creditor for time to get debt advice if you need to, before they take court action.
  • If the creditor goes on to take court action, you will receive a 'claim form' from the court. The claim form will include details of the debt, known as the 'particulars of claim'.


If you don't agree with the amount the creditor says you owe, you will need to put in a defence. Putting in a defence or counterclaim is complicated. Seek advice.

What if I agree that I owe the debt?

There will be a reply form with the claim form for you to make your offer of repayment. This is called the 'admission form'. There are instructions included on how to fill in the form. It looks quite like a budget summary and asks for similar information on income and essential outgoings.

Do I make an offer of payment?

In the claim form there is a section you can fill in to include your priority debt payments. You can also have space to include any other court judgments you have, and to list all your non-priority debts. Id it important to make an offer of payment in the 'offer box'. If you leave it blank, the court will decide you have not made an offer and tell you to pay the whole debt at once, or order you to pay what the creditor asks for.

If my creditors take court action, what are the advantages?

  • The court will stop interest being charged on most ordinary credit agreements. This means that the amount you owe cannot increase. Some creditors may tell you they can charge interest on a debt before and after judgment. There are rules about when interest can be charged and what notices your creditor must provide. If this happens to you, seek advice.
  • In most cases, the court is likely to let you pay a monthly amount which you can afford. But it can only do this if you explain your income, outgoings and other debts on the reply form to the county-court claim.
  • Usually you won't have to go to the court for a hearing. Most of the procedure is done through the post.

If my creditors take court action, what are the disadvantages?

  • Court costs are added on to your debt, although creditors cannot add on what they want. Court costs are added on the amount of money you owe.
  • Details of judgements are recorded on the Register of Judgments, Orders and Fines and passed to credit reference agencies. This may make it difficult for you to get credit in the future.
  • If you pay off your county-court judgment within one month, you can ask to have the entry removed from the register.
  • If you do not pay the monthly amount which the court orders, the creditor may take further action against you. So make sure you pay your monthly payments or apply for them to be reduced if you cannot afford the first amount which the court fixed.

How to get help with court fees

If you need to apply to the court, there will usually be a fee to pay. You may not have to pay the fee, depending on your circumstances. The form you will need to fill is called an EX160 'Application for a fee remission'. This form needs to go to the court with your main application.

If you are on Income Support, income-based Jobseeker's Allowance or income-related Employment and Support Allowance, or if you receive the guarantee part of Pension Credit or Working Tax Credit without Child Tax Credit, you will need to ask the court for exemption from the fee. You will also need to give the court proof that you are getting the benefit or tax credit.

  • For Income Support, income-based Jobseeker's Allowance and income-related Employment and Support Allowance, this proof should be a letter or notice that is less than one month old.
  • For Working Tax Credit, the letter or notice should be for the current financial year.
  • For the Guarantee Credit part of Pension Credit, the letter or notice should show that your assessed income period covers the current financial year.

You will also not have to pay the fee if your income is below a set amount. You may only have to pay part of the fee if the court decides your disposable income is below a set amount. The calculation is complicated and you will need to give the court proof of your income and bills. Ask the court for help or seek advice elsewhere.

Reducing payments on court orders

If you cannot afford what the court has decided you should pay, you can write and ask the court to look at the offer again. This is called a 'redetermination'. There is no fee for doing this. You must do this within 14 days of getting the order. The district judge can decide to have a hearing or make a decision by looking at the papers. You can ask for a hearing when you write to the court to ask them to look at your case again. The case should be transferred to your local county court if there is a hearing.

If more than 14 days have passed since you got the court order, you cannot apply for a redetermination but must apply for the monthly payment to be reduced.

You can apply for a reduction using form N245, which you can get from your local county court office or from the Courts and Tribunals Service website justice.gov.uk Search for 'Court form finder'. There will usually be a fee to pay with your application.

An N245 court form is similar to the budget summary you may have already completed. You can use the pro-rata payment figures you have worked out to make an offer on the court form.

Further action creditors can take

If you do not pay the monthly amount the court orders, the creditor can ask the court to take further action. The following methods are most commonly used.

Bailiff's warrant

The creditor can ask the court to instruct bailiffs. You do not have to let the bailiffs in. the bailiff cannot force their way into your home unless you have let them in before. They could take your car if it is parked nearby. You can ask the court to suspend a bailiff's warrant by filling in a county-court form N245 and making the offer of payment you can afford. You will need to pay a fee to do this.

Keeping my belongings

  • As long as you act quickly, it is rare for county court bailiffs to actually take people's belongings.
  • Basic household goods cannot be taken
  • County court bailiffs have no right to break in, unless you have let them in at another time
  • Use an N245 to suspend the warrant immediately

Attachment of earnings

The court can order your employer to make deductions from your wages to clear your debt. The court works out the rate by using a set formula. This order can be suspended if it might affect your employment and you can make the payments yourself. If a creditor is threatening to make an attachment of earnings against you, seek advice.

Charging orders

If the court orders you to pay your judgment in one lump sum (called a 'forthwith' payment) or if you fall behind on the monthly amount ordered by the court, the creditor can ask for a legal charge on your home. This is called a 'charging order'. This only applies if you own or have a mortgage on your home, and not if you rent it.

The charging order means the debts is secured on your home like a mortgage and may put your house at risk. There must be a hearing in the court before a charging order is made final. It is up to the court to decide and there are several arguments you can use against a charging order being made.

It is becoming increasingly common for creditors to apply for a charging order. If a creditor applies for a charging order, seek advice immediately.

Your rights:

  • If you do have to go to court hearing, your name will not appear in the local paper, so don't worry about publicity.
  • The county court is not a criminal court and is not there to punish anyone.
  • The court staff and the district judge who decide the cases are used to dealing with people who do not have a solicitor.
  • If you receive a letter or form from the court you do not understand, take it to them and ask for an explanation

Remember you have the same rights as your creditors do.

Can I get credit again?

There is no such thing a 'credit blacklist' but if you do not pay your debts, you may find it difficult to get credit in the future.

When you apply for credit, most companies will consult a credit reference agency. They keep records of all county-court and High-court judgments, bankruptcy orders, IVAs, DROs and details about credit accounts. This information is kept on file for six years. It will show if you are behind with your payments. If you are in arrears or have a county-court judgment, you may well be refused credit.

If you are refused credit, you have a right to ask if the finance company has used a credit reference agency. They must give you the agency's name and address.

The company should give you good reasons why they turned you down for credit. This includes telling you if they have used a credit-scoring system. To get a copy of your credit report, you need to contact the credit reference agencies and fill in an application form. There is a fee of £2. you can usually apply in writing, by phone or online.

The Information Commissioner's Office publishes a useful guide to credit reference agencies called Credit Explained.

Credit-repair companies

You may have heard of companies that offer to clear your credit record if you pay a fee. Be very careful. Many credit-repair companies promise to remove judgements when they cannot legally be removed. Credit-repair companies must have a consumer credit licence from the Office of Fair trading. Check if the company has a licence before using their services. If you have a complaint about something a credit-repair company has done, you can ask the Financial Ombudsman Service for help.