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Step 4Your non priority debts

Use this section to work out how to deal with your non-priority debts. These are debts where the creditor hasn’t got extra powers to make you pay (for example, they cannot take your home). They are often called non-priority debts because of this. Non-priority debts can usually be treated differently to priority debts.

Use this simple checklist to make sure you take the right steps to deal with your non-priority debts.

  • Do you need a safe bank account? Make sure that any money you receive (for example, earnings from your business, wages or benefits) goes into an account at a bank or building society that you don’t owe any money to. This means the bank or building society will not be able to take any of your income to pay your debt to them. This also applies to a business bank account.
  • Work out a business and household budget sheet: Your budget is very important as it will help you decide what options you have for dealing with your debts. It will also help you to negotiate with your creditors, fill in any court forms, or ask for your debts to be written off.
  • Deal with court forms on time: If any of your creditors have issued a county court claim against you, you need to make sure you have replied to the court forms. This means filling in the forms the court sends you and returning them to the right place by the deadline. This will help you avoid any enforcement action, such as bailiffs.
  • Explain your situation to your creditors: Even if you haven’t decided how to deal with your non-priority debts, it’s a good idea to explain to your creditors in writing that you are struggling. Tell them you are taking advice and doing a budget. This may buy you some breathing space. Use our Hold action on your account sample letter.
  • Decide on a strategy: You may have more than one option for dealing with your non-priority debts. You need to make sure you understand what each option means, and the advantages and disadvantages, so you can be sure what you decide is right for you.

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

There are different options for dealing with your non-priority debts, depending on your circumstances. We have outlined some of the main options below.

Which option is right for you will depend on things such as your income, how much debt you have, your assets, whether you own your home and the possible effect on your business. Your credit rating will normally be affected, whatever option you decide to take. This means it may be difficult for you to get credit in the future.  

What if I have some money left to pay my creditors?

Pro-rata offers of payment

You can work out offers of payment based on a ‘pro-rata distribution’ of your available income. This means you offer all your creditors a fair share of what you can afford to pay. Our budget tool, Your budget, will work out pro-rata offers of payment to your creditors for you. The calculation is also shown here. Alternatively, contact us for advice.

You also need to ask your creditors to freeze any interest and charges. You can write to your creditors, sending them a copy of Your budget, and ask them to agree to your offers of payment. Use our Pro-rata offers sample letter.

Pro-rata calculation

  • Step 1 – make a list of all your non-priority creditors and how much you owe each of them.
  • Step 2 – add up the total amount that you owe to your non-priority creditors.

You will then need to follow steps 3 and 4 for each non-priority debt.

  • Step 3 – multiply the amount you can afford to pay your non-priority creditors by the amount of debt that you owe an individual creditor.
  • Step 4 – then divide the figure worked out in ‘step 3’ by the total amount that you owe to all your non-priority creditors.

Example pro-rata calculation

Pat and Eva have worked out that they can afford to pay their non-priority creditors £107 every month. This is their surplus for non-priority creditors.

In the first step, Pat and Eva list down their non-priority creditors and how much is owed to each one:

  • Newhome catalogue (£918)
  • Alphabet bank loan (£2,842)
  • Unicorn credit card (£3,467)

For the second step, they add up how much the non-priority debts come to in total. The total for these three debts is £7,227.

To calculate the pro-rata offer for each creditor, the third and fourth step can be done together. For each non-priority creditor, the surplus (which was £107) is multiplied by the amount owed to that creditor, and then divided by the total (which was £7,227).

  • Newhome catalogue. £107 x £918 ÷ £7,227 = £13.59. This can be rounded up to £14 per month.
  • Alphabet bank loan. £107 x £2,842 ÷ £7,227 = £42.08. This can be rounded down to £42 per month.
  • Unicorn credit card. £107 x £3,467 ÷ £7,227 = £51.33. This can be rounded down to £51 per month.

Free debt-management plan (DMP)

This means you make one payment every month to a debt-management company 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 directly with your creditors to accept your offers and freeze the interest. Contact us for advice. We may be able to help you set up a free DMP if:

  • you can afford to pay at least £5 to each of your debts; and
  • you can repay your debts within 10 years.

See our Debt management plans fact sheet for more information

Bankruptcy

You may want to think about bankruptcy, even if you have some money left to pay your creditors.

Individual voluntary arrangements

An individual voluntary arrangement (IVA) is another option instead of bankruptcy. 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. Creditors can stop the IVA going ahead by voting against it. An IVA is usually only an option if you have a reasonable amount of money available every month to pay your creditors or you have a lump sum or assets that you can include. In rare cases, you may risk losing your home. See our Individual voluntary arrangements fact sheet for more information.

Administration orders

If you have a county court judgment, 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 to the court. The court then shares the money between your creditors. The total of your debts must be no more than £5,000. 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 help in filling in the application form as local courts deal with administration orders differently. If you want to apply for an administration order, see our Administration orders fact sheet for more information.

Can I offer to pay 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 of the debts. This is known as ‘an offer in full and final settlement’. This may be an option if you come into some money or have some savings you can use. Creditors do not have to accept an offer in full and final settlement but, if your circumstances are unlikely to improve, they may agree to your offer. If a creditor agrees to your offer, make sure they confirm this in writing. See our Full and final settlement offers fact sheet for more information.

Consolidating your debts into a new loan

This is where you add all your debts together and take out a new loan (a consolidation loan) to pay them off. You need to think very carefully before deciding to do this. Check out consolidation loans on the Money Advice Service website www.moneyadviceservice.org.uk.

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, contact us for 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 and a letter to back this up. Ask your creditors to hold action until your circumstances improve. This is called asking for a ‘moratorium’. If you prefer, you could offer a token payment of £1 a month to each creditor instead. Use our Token payment or no offer of payment sample letter to help you.

Debt relief order

You may be able to apply for a debt relief order (DRO). DROs can be another option instead of bankruptcy and are cheaper to apply for. You may qualify for a DRO if:

  • you owe £30,000 or less in total;
  • you can’t afford to pay more than £75 a month to your creditors; and
  • you have total assets of £2,000 or less and a car or motorbike worth less than £2,000.

If you get a DRO, your debts are written off after 12 months. You will need help to fill in an online application from an approved advice agency, such as a money advice centre, citizens advice bureau or Business Debtline. You will have to pay a fee to the Insolvency Service to apply for a DRO. Contact us for advice.

See our Debt relief orders fact sheet for more information.

Bankruptcy

If you owe a lot of money and you cannot see a way out of your debts, bankruptcy might be a good option for you. You should consider going bankrupt if you have no assets or you are prepared to lose your assets and possibly your business.

You must owe £5,000 or more before a creditor can make you bankrupt (although two or more creditors can club together and apply to make you bankrupt). Non-priority creditors are less likely to make you bankrupt than priority creditors because it costs them money in fees and costs.

They will probably not recover the debt and the costs of making you bankrupt unless you have assets that can be sold to pay your debts.

Once you are declared bankrupt, your creditors can usually take no further action against you. Going bankrupt can have important effects, particularly if you own your home and it is worth more than the mortgage you have left to pay. In this case, your home could be sold as an asset. Being made bankrupt could also affect your ability to carry on being self-employed. Bankruptcy may also affect you if you are a paid employee, if your contract of employment does not allow you to become bankrupt.

You can make yourself bankrupt but the fees are high. Your bankruptcy will normally last for one year. After this, usually debts that have not been paid are 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 order. If a creditor has threatened to make you bankrupt, or you think it may be an option for you to consider, contact us for advice. See our Bankruptcy fact sheet for more information.

Partnerships

If you are a partner in a partnership you will need consider whether you should make your partnership bankrupt as well as making yourself personally bankrupt. There are different fees and forms to complete if you are applying to make your partnership bankrupt. Contact us for advice. See our Business partnerships fact sheet for more information.

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 give your creditors evidence of your circumstances. Use our Write off debt sample letter to help you.

Interest

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 daily or monthly. 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 the creditor to freeze all the interest and charges.
  • Late-payment interest. In the case of business-to-business transactions (involving sole traders, partnerships or limited companies), the creditor can claim late-payment interest under the Late Payment of Commercial Debts (Interest) Act 1998. Contact us for advice.

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

What if a 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. For more information see our Refused offers fact sheet.

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. 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-payment charges. Ask them not to charge these (‘waive’ them).

Copies of credit agreements and account statements

You usually have the right to ask for a copy of your credit agreement and an account statement. There are different laws which allow you to ask for different types of information. You have to pay a small fee when you make your request. If your lender does not provide the information you have asked for, they may be limited in the further action they can take against you. See our Credit agreements - getting information fact sheet for more information.

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 large 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 with a claims management company, contact us for advice.

Dealing with your creditors

Check the name on the agreement

Only the person who signs an agreement is responsible for the debt. 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 your local trading standards department or contact us for advice.

Partnerships and limited companies

In a partnership, business partners are liable for all partnership debts. This is called 'joint and several liability'.

If you are a director of a limited company, you will not be personally responsible for the company's debts unless you have signed a personal guarantee.

Under 18s

People under 18 can only be made to pay for ‘essential goods and services’ bought on credit, such as energy supplies. If you are under 18 and have an agreement for non-essential goods or services, the creditor cannot ask the court to make a county court judgment for the debt. 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.

Guarantors

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. If you have a guarantor for one of your non-priority debts, or are a guarantor for someone else, contact us for advice.

What if a creditor refuses my offer?

Sometimes a creditor will refuse to accept the offer of payment you have made on Your budget. They may demand more than you can afford. Sometimes they may 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 their letter. Don’t give up. You can usually persuade creditors to accept your offer of payment by using the following steps.

  • Start paying the amount you have offered anyway as a gesture of goodwill.
  • Contact us for advice on how to approach your creditors if they refuse your offer or refuse to freeze the interest.
  • Write to the creditor again and ask them to reconsider their decision. Tell them your offer is reasonable and is 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 afford the payments you have agreed with your other creditors, particularly for 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 in their own budgeting form. Ask them to accept Your budget instead as this has all the information they need.

Contact us for advice if you feel a creditor is acting unreasonably. We can give you details of their trade association and advise you about the Financial Conduct Authority’s Consumer Credit sourcebook (CONC). CONC sets out rules and guidance which organisations must follow when collecting debt. We can also tell you about making a complaint to the Financial Ombudsman Service (FOS). See our Refused offers fact sheet for more information.

What if creditors ask for proof?

Sometimes, creditors 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 all your bills, point out this would not usually be asked for by the court. Contact us for advice.

Don’t pay more than you can afford

The offers of payment in your business and household budget sheet 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 for your outgoings and other creditors.

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. There are basic bank accounts available for business banking and for personal banking. Contact us for advice.
  • Ask your creditors for a 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 which accepts payments in this way. For details of your nearest PayPoint, see www.paypoint.co.uk. For details of Payzone, see www.payzone.co.uk.
  • You may be able to pay at a 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 a record of all the 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 back telling them this. Enclose a copy of Your budget.

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 a debt collection agency has dealt with your account. You will have to follow your lender’s complaints procedure first, but your lender only has one opportunity to deal with your complaint before you can ask the ombudsman to look at it. To make a complaint to the 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 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. For more information about the unfair relationships test, contact us for advice. See our Complaining about your lender fact sheet for more information.

What if I already have a county court judgment?

If you already have a county court judgment, you should include this debt with your non-priority debts and work out an offer of payment in the same way.

If this offer of payment 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. If you need to reduce the amount that you have to pay on a county court judgment, contact us for advice. See our Varying a CCJ fact sheet for more information.

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 to make you pay, they may be committing an offence under the Consumer Protection from Unfair Trading Regulations 2008.

The Financial Conduct Authority (FCA) has issued the Consumer Credit sourcebook (CONC). It sets out rules and guidance that organisations must follow when collecting debt. If an organisation breaks these rules or guidelines, the FCA may question their fitness to be authorised to provide consumer credit. Contact us for advice.

Collection agencies

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

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. Contact us for advice. See our Harassment by creditors fact sheet for more information.

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 Illegal Money Lending Team.

Interest and bank 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 and interest, so that the amount you pay reduces the debt. If the staff at your local branch are 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. 

The Standards of Lending Practice - Business Customers

The Standards of Lending Practice – Business Customers sets out how banks, building societies, credit card providers, charge card providers and their agents should treat business account customers when they have financial difficulties. Under the standards, your lender should:

  • give you support and fair treatment;
  • not harass you or put you under undue pressure when discussing your problems;
  • consider any information that you provide when looking at solutions for the debt;
  • offer solutions that do not make your situation worse; and
  • support your plan to turnaround your business if they believe it has a good chance of working.

For more information, contact us for advice.

The Standards of Lending Practice - Personal Customers

The Standards of Lending Practice - Personal Customers sets out how banks, building societies and credit card providers and their agents should treat personal account customers when they have financial difficulties. Under the standards, your lender should:

  • give you support and fair treatment;
  • not harass you or put you under undue pressure when discussing your problems;
  • show that they have an understanding and an awareness of your issues;
  • help you to develop an affordable and appropriate plan to manage your situation;
  • give you time to assess your options and refer you for free debt advice when it is clear that this would help you to sort things out; and
  • consider freezing or reducing interest and charges.

For more information, contact us for advice.

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 to 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. Contact us for advice.

Consolidation loans

Beware of adverts 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. Contact us for advice.

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. Sometimes, the bank will secure all the money you owe them now, and all the money you may borrow from them in the future, on your home. This is called an ‘all monies charge’. This usually applies to business lending such as business loans and overdrafts. If the bank takes you to court, it may be difficult to suspend a possession order to pay off the overdraft or an all monies charge in instalments. If you have an overdraft secured on your home, contact us for advice.

If your bank is asking you to agree to secure an overdraft on your home or wants you to sign an all monies charge, contact us for advice.

Complaints

Banks should have a complaints procedure under the Standards of Lending Practice - Business Customers and the Standards of Lending Practice - Personal Customers and they should make the procedure public. If you have a complaint, you need to follow your bank’s complaints procedure. If you are not satisfied with how they have dealt with your complaint, you may be able to complain to the Financial Ombudsman Service. They can only deal with certain types of complaints. For information, contact the Financial Ombudsman Service directly. See our Complaining about your lender fact sheet for more information.

Debts with your bank – overdrafts, loans and credit cards

Many people use their current account with a bank or building society to pay in drawings from their business or wages 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, 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 your 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. This is called the ‘right of set-off’. Before negotiating a repayment arrangement with your bank, you should consider opening an account elsewhere to pay in drawings from your business or wages. Do this immediately if the bank or building society does not agree to your offer. If your bank tries to take money from your account in this way, contact us for advice.

Standards of Lending Practice 

The Lending Standards Board’s Standards of Lending Practice - Personal Customers and Standards of Lending practice - Business Customers state that personal customers in financial difficulty “will receive appropriate support and fair treatment" so as "to help them deal with their debts in the most suitable way.”

Opening a bank account

You may have difficulty opening a business or personal bank account if you have missed payments to your creditors. However, opening a basic bank account should not normally involve a credit check. Basic bank 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 chequebooks, cheque-guarantee cards or an overdraft. Shop around the high-street banks and building societies for the best deal or contact us for advice.

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.

Basic bank accounts

Contact the Money Advice Service for a list of basic bank accounts on 0300 500 5000 or see www.moneyadviceservice.org.uk.

See our Safe bank accounts fact sheet for more information.

Extra help

Here we give information and advice on some non-priority debts that can be more difficult to deal with. They are:

  • charge cards;
  • payday loans;
  • catalogue debts;
  • personal debts to friends and family;
  • household water-rates arrears; and
  • non-priority business debts.

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 non-priority debts. If your charge card company is threatening to take further action, contact us for advice.

Payday loans

A payday loan is a short-term loan, usually for a small amount of money. 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 you 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 the loan company permission 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. Contact us for advice. See our Payday loans fact sheet for more information.

Catalogue debts

Mail order catalogues offer a way of buying goods by post and spreading the payments over a period of, typically, 20 to 40 weeks. Orders for goods and the collection of payments are sometimes undertaken by a local part-time agent; often this is a friend, relative or neighbour.

You should treat catalogue debts 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, contact us for advice.

Liability of agents

If you act as an agent for the catalogue company and sell goods, or collect money for the company, you need to be careful. You should create a separate account for each of your customers. If you do not do this, then the catalogue company may hold you responsible for any payments missed by your customers.

As long as you set up separate accounts, you (as an agent) should not be held personally liable for your customers’ missed payments.

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 is 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.

Household water-rates debt

Include any water-rates arrears with your other non-priority creditors, but keep up with your ongoing bills so your debt does not get any bigger.

Water rates with rent

Some landlords collect payment for water rates in with the rent. If your tenancy agreement includes the payment of water rates as part of your rent, water arrears can count as rent arrears and could lead to court action to repossess your home. So treat water rates arrears paid to your landlord as a priority payment. Agree an amount that you can afford to pay to the arrears with your landlord. Phone us for advice.

Non-priority business debts

If you do not need to continue to trade with a particular supplier or service provider, you could treat any debts you have with these companies as non-priority debts. However, you may need to take care as some business suppliers are more likely to take court action, or make you bankrupt. If you are not sure whether to treat a business debt as a priority or a non-priority debt, contact us for advice.

What if my creditors take court action?

Many people are frightened of courts, especially when they feel guilty because they owe money. In connection with debt matters, the County Court and the High Court are not criminal courts.  They are not there to judge anyone as guilty or innocent. They are there to settle disputes about money owed and how to repay it. The courts are not there to protect the interests of creditors alone. If the creditor is a business you will both need to follow court rules called the pre-action protocol claims. The court is keen to see you come to an arrangement with your creditors without court action. If court action is taken, you may not have to go to a court hearing. Much of the procedure is done through the post.

  • The creditor should send you a letter before they start court action called a letter of claim. The letter of claim should give you details of how much you owe and how the amount has been worked out. The letter should also tell you how to pay and how to contact the creditor to discuss your repayment options. It should also include a list of free, independent advice agencies you can contact.
  • You need to reply to the letter of claim within 30 days. You can agree that you owe all of the money, some of the money or none of the money. You can also ask for more information if you aren’t sure.
  • The rules allow you to ask the 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 do have to go to a court hearing, your name will not appear in the local paper, so don’t worry about other people finding out.
  • The court staff and the District Judge or Master who decide the cases are used to dealing with people who do not have a solicitor.
  • Your creditor may start action in the High Court or transfer court action to the High Court from the County Court.  If your creditor transfers court action, you may be contacted by a High Court Enforcement Officer (HCEO).

If you receive a claim form or letter from the court, or if you are contacted by a High Court Enforcement Officer (HCEO), contact us for advice.

Sole traders, partnerships and limited companies

  • If you are a sole trader, you can use the information on this website as a general guide if you don’t dispute the debt.
  • If you are in a partnership, the creditor should serve a copy of the claim form on each of the partners. You should discuss the case with your partners before deciding what to do and agree a common approach. A majority of partners needs to agree to offer payment or defend the action. If you can’t reach an agreement with the other partners, you need to get legal advice from a solicitor. If the partnership has been dissolved (ended), creditors can take court action against each partner individually. If the partnership has been dissolved, you can use the information in this pack as a general guide if you don’t dispute the debt.
  • If you are a director of a limited company, court action should not be taken against you as an individual unless you signed a personal guarantee or have been made personally liable by the court following a formal liquidation of the company. If action is taken against the company, the directors need to agree how to reply. If you have been taken to court as an individual, even though the business is a limited company and you have not signed a personal guarantee, you should get advice from a solicitor immediately. If you are are being taken to court as an individual and there is no dispute, use the information in this pack as a general guide.

See our Replying to a County Court claim fact sheet and High Court enforcement fact sheet for more information.

Defences

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. Contact us for advice.

Further action the creditor can take

Usually, 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 bailiffs cannot force their way into your home unless you have let them in before. Bailiffs can force entry into a business premises with the court’s permission. The court can only grant permission for this if there is no living accommodation attached to the business. If a creditor is threatening to use bailiffs, contact us for advice. See our County Court bailiffs fact sheet for more information.

Attachment of earnings

If you are also employed, the court can order your employer to make deductions from your wages to clear your debt. The court uses a set formula to work out the rate of the deductions. This order can be suspended by the court if it might affect your employment and you can then make the payments yourself. If a creditor is threatening to make an attachment of earnings against you, contact us for advice. See our Attachment of earnings orders fact sheet for more information.

Charging orders

If the court makes a county court judgment, the creditor can ask for a legal charge on your business premises or home. This is called a ‘charging order’. This only applies if you own, or have a mortgage on, your business premises or home, and not if you rent or lease them. The charging order means the debt is secured like a mortgage and may put your property at risk.

If you object in time, 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. If a creditor is threatening to apply for a charging order, contact us for advice. See our Charging orders fact sheet for more information.

If you agree you 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 household budget and asks for similar information on your income and essential outgoings. You should fill this in and send the court a copy of Your budget so it has a full picture of your circumstances. Contact us for advice. See our Replying to a County Court claim fact sheet for more information.

Do make an offer of payment

In the claim form, there is a section you can fill in to include your priority debt payments. You also have space to include any other court judgments you have, and to list all your non-priority debts. It is 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. If this happens to you, contact us for 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.

See our Interest on a CCJ fact sheet for more information.

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

How to get help with court fees

If you need to apply to the court, there may be a fee to pay. You may not have to pay the fee, depending on your circumstances, for example, if you are on benefits or a low income. Contact us for advice.

Reducing payments on court orders

If you cannot afford what the court has decided you should pay, you can write to the court to ask it to look at your 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 it to look at your case again. The case should be transferred to your County Court hearing centre if there is a hearing. Contact us for advice.

If more than 14 days have passed since you got the court order, you cannot apply for a redetermination. Instead, you must apply for the monthly payment to be reduced. Contact us for advice. See our Varying a CCJ fact sheet for more information.

Can I get credit again?

There is no such thing as 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 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 finance 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 free copy of your credit report, you need to contact the credit reference agencies and fill in an application form. 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. These are known as credit-repair companies. Be careful. Many credit-repair companies promise to remove judgments when they cannot legally be removed. Credit-repair companies must be authorised by Financial Conduct Authority (FCA). Check if the company is authorised on the Financial Services Register before using their services. You can complain to the Financial Ombudsman Service about something a credit-repair company has done.

See our Credit reference agencies fact sheet for more information.

​Next steps...

You are now at the end of Step 4. We hope you have been able to follow the steps easily and now feel better able to deal with your debts. There is a lot more help available if you need it. You can visit our Fact sheet library our use our Sample letter library. Remember - you can always contact us for help, information and advice on 0800 197 6026.