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Help with prioritising your debts

UK Loans provides help for those of you with good or adverse credit.

Priority Debts

How to Deal with priority debts or credit debts.

You need to decide which of your debts are the most important – the debts you need to start paying off first. In this article you will find out how to prioritise your debts.

About Priority Debts

Some kinds of debt are more important than others and United Kingdom law gives creditors different ways of getting their money back. If you don’t do anything, your creditors could:

• repossess your home or evict you;
• send round the bailiffs to take possessions from your home (this is called ‘distraint’); or
• disconnect your electricity or gas supply - the law has now changed and water companies can't cut off your water supply;
• ask the magistrates’ court to actually send you to prison.

The following table gives guidance to what might happen if you delay dealing with your debts. The debts listed are all priority debts and it is important to use your money for creditors to make agreements to settle these particular debts first. Creditors can act on some types of priority debt without going to court first. Electricity and gas companies can cut your supplies. HM Revenue & Customs can send bailiffs without a court order for income-tax and Value Added Tax debts. Other priority creditors can take action against you only after going to court. The best thing to do is not to panic because you will always be given warnings and as long as you act quickly you should be able to stop these actions from happening. Rent and mortgage arrears are extremely important because you can lose your home if you do not pay them.

Mortgage and rent arrears

If you get behind with your rent or mortgage payments you could lose your home so these particular debts are extremely important.

Council Tax

The amount of money you pay in Council Tax is based on two things:

• value of your home; and
• the number of adults who live in the home and their status

Who should pay?

Only those over eighteen can be made to pay this bill. If there is more than one person over eighteen living in your home, the owner will normally have to pay the bill. Joint tenants and owners may have to pay even if their names are not on the bill. If you are married or live with someone as husband and wife, or live together in a same-sex civil partnership, both you and your partner will be responsible for paying this bill. Occasionally the owner of a house will be responsible for the bill even if they don’t live there. This is usually in homes which are classed as those in multiple occupation - like bedsits. If you are not sure who would pay the bill, contact The National Debtline for advice.

Reducing the bill?

You may get a reduction if someone living in the house has a disability. Apply to the council for this. Only some properties will qualify. You will get a discount in the following circumstances.

• If you are the only adult.

• Or, if you share your house with people who are not taken into account, such as:
  – a full-time student or student nurse;
  – an apprentice or someone on a youth training scheme; or
  – someone with a mental disability who is getting certain disability benefits.

You can tell the council if you think you may qualify for a discount. You could claim Council Tax Benefit if:

• you are on a low income with less than sixteen thousand pounds in savings; or

• you are on Pension Credit, Income Support, Jobseeker’s Allowance, Employment and Support Allowance or other benefits.

You could get help with paying all or some of your bill by claiming Council Tax Benefit. You can contact your local council for an application form. You could also claim a rebate, this is called ‘Second Adult Rebate’ if:

• you share your home with someone and they are on a low income who does not pay rent and is not your husband, wife or partner; and

• you don’t already get a discount for them.

If you are in this particular situation, the council usually works out if you are better off claiming your own Council Tax Benefit or getting the Second Adult Rebate.

Getting Extra help

Appeal against Council Tax decisions
If you think that your Council Tax Benefit has been worked out wrongly you can ask the council for a review. If you are not happy with this outcome, you can appeal against the decision to an independent tribunal but you have to do this within a month of the review decision. But you can only appeal if you think that a mistake has been made. If you think your home is in the wrong council tax band, you can appeal to the Local Valuation Office Agency. Their address is usually on your Council Tax bill. For further information about who can appeal, contact a local welfare rights agency or contact The National Debtline for advice.

What will happen if I don’t pay?

The council will tell you to pay your bill in ten monthly installments but they can sometimes accept weekly payments. If you find at any time that you can’t pay the full monthly installment, don’t just stop paying!

• You have to keep paying what you can afford.

• If your circumstances have recently changed, you may now qualify for Council Tax Benefit, so claim now.

• Contact your local council and try to come to an arrangement.

Liability orders

If you can't keep to a payment arrangement you make with the council, they will ask the magistrates’ court to make a ‘liability order’ for the full amount they say you owe, plus court costs. This order usually states that you are due to pay your Council Tax and have not done so.

The court must make the liability order unless:

• the council has not been through proper procedures;

• you have paid the amount owed; or

• the name on the court summons is wrong.

If one of these applies, tell the council immediately and go to the court hearing. You usually get fourteen days’ notice of the hearing. You can ask the court to adjourn the liability order hearing in the following circumstances.

• If you have applied for Council Tax Benefit.

• Or, if you have appealed to a valuation tribunal because:
  – you don’t agree you are legally responsible for the bill; or
  – you don’t agree with the amount of the bill.

The court does not have to adjourn the hearing but they may agree to it.

A Warning
If the council has not taken you to court for a liability order within 6 years of you becoming due to pay your Council Tax, they can't continue to collect the money owed.This depends on when the council served a demand notice on you.

Methods of enforcement

Get in touch with the council to agree a payment arrangement. If you don't do this there are many ways the council can make you do so. The council can demand that you and your husband, wife or partner give them details of your financial circumstances. You can be fined for not giving this information.

Deductions from your wages
If you have a job the council can order your employer to take a fixed amount from your pay towards what you owe the Council.This is called an ‘attachment of earnings order’ and it can mean a large amount of your wages is taken. Deductions are made on a sliding scale depending upon how much you earn. If you owe more than one year’s Council Tax, you can have a maximum of two attachment of earnings orders. Usually any payments are taken one at a time. If this will cause you hardship, you can ask the council to accept smaller voluntary payments instead. Explain why you can't afford the higher amount.The council does not have to agree but it is worth trying. If the council does not agree contact your local councilor or The National Debtline for advice.

Distraint
The council can also ask bailiffs to go to your home and take goods away which may be sold to pay off your debt. They must send a letter first giving 2 weeks’ notice telling you that bailiffs will call and how much you still owe under the liability order.

As soon as possible contact the council and the bailiffs and try to make arrangements to pay. If the bailiffs won't accept your offer of payment, ask the council to take the account back from the bailiffs to let you pay the council directly. Try to do this as soon as you can because you could be charged costs for each time the bailiffs come to your home. Even if the council refuse to take the account back, you should still make payments to them. They will add these payments to your account and it is good because it shows you are willing to pay. Use your personal budget to support your offer and start paying immediately. If the bailiffs try to break in or they threaten you, contact The National Debtline for advice.

Bailiffs are not allowed to take certain basic household goods.They could take your car if it is parked nearby.The bailiffs cannot force their way into your home unless you have let them in before. Do not sign any papers the bailiffs may post through your door, otherwise you may be charged extra costs and the bailiffs may try to enter by force.

Deductions from Pension Credit, Income Support, Employment and Support Allowance, or Jobseeker’s Allowance
You can also ask the Department for Work and Pensions to take a certain amount each week from your Pension Credit, Income Support, income-related Employment and Support Allowance, or income-based or contribution-based Jobseeker’s Allowance to pay for Council Tax arrears. If they agree to do this, the council should not take any further action while the money is being taken direct from your benefit.

Bankruptcy
Also the council can try to make you bankrupt if the debt is seven hundred and fifty pounds or more. This is being used by councils more and more if you owe Council Tax bills for lots of different years as they can add these together. You can complain if the council has not considered other options first. If the council threatens to make you bankrupt, contact The National Debtline for advice.

Charging orders
If the debt is for one thousand pounds or more, the council can apply to the county court for a legal charge on the house on which you owe the Council Tax.This means that the debt is ‘secured’ on your house like a mortgage, and so it could put your home at risk.

Imprisonment
When the council has tried to use bailiffs and you have still not paid your Council Tax in full, they could apply to the magistrates’ court for an order for you to be sent to prison. The court is unlikely to send you to prison if you have not paid because you don’t have enough money. There must be a hearing in the court to look at why you have not paid and whether you have the money to pay. You must go to the hearing and show the court your personal budget and explain why you have not been able to pay.

The court usually don't send you to prison if you can't afford to pay. They only do this if they think you have deliberately refused or neglected to pay when you could have done. If you have to go to court, make sure you get legal advice first. Contact an advice agency, law centre, or a solicitor. Most magistrates’ courts have a duty solicitor scheme that may be able to help. You can also qualify under the ‘Legal Help’ scheme for a solicitor to help you at the hearing, this depends on your income. Contact The National Debtline for advice. In exceptional circumstances the court may order the Council Tax debt you owe to be ‘written off’ so you do not have to pay the debt back. But usually they order you to pay an amount every month until you have paid off the debt. If you do not pay the agreed amount regularly, you will have to go to court again and you could be sent to prison for up to three months. If you find you cannot pay what the court has ordered you to pay, keep paying what you can afford and apply to the court to reduce the amount you have to pay.

The Council Tax is a priority debt
Because of the council’s powers to make you pay Council Tax, you must treat this debt as a priority debt. If you can’t pay the full amount:

• make sure you can claim Council Tax Benefit;

• double check the bill and make sure that it has been worked out correctly;

• contact your council and make an arrangement to pay; and

• pay what you can afford.

If you have credit debts, use your personal budget to arrange reduced payments to those creditors.

Arrears with the community charge

In April 1993 the community charge was replaced by Council Tax. But you may still owe community charge from previous years as well as having a bill for Council Tax. If this applies to you, contact The National Debtline for further advice.

Arrears with gas and electricity

The electricity and gas companies can cut off your supplies in a few weeks if you don’t pay them. A court is not involved in these decisions. It is vital to contact them to make a payment arrangement as soon as you know you are going to have problems. You should treat gas and electricity bills as a priority debt.

Double checking liability for the bill

If you are not the person whose name is on the bill (it could be the name of someone who has left your home), you may not be legally responsible for the arrears up to the date they left. You can argue with the energy company that you are not legally responsible for the bill. This should prevent you being cut off until the dispute has been sorted out.

Different addresses and old bills
You can be cut off for an electricity or gas bill from an old address if you move home and keep the same fuel supplier. You need to treat old bills from the same supplier as a priority too.

Making an arrangement

Bills for electricity and gas are normally sent out every 3 months. The energy company will want the bill paid before the next bill is due. You can ask to pay your bills every week, every two weeks, or every month. If you have arrears contact the company and ask for a payment arrangement.

Credit agreements with electricity and gas companies
If you have bought things such as a cooker, fire or video from the company, and you are paying for them through a credit agreement, you can usually ask the company to separate your fuel account from your credit account. Your fuel supply can't be cut off because of arrears on the credit account. Use your personal budget to support your offer of payment. This must cover the cost of the fuel you are using and an amount off the arrears. Even if the company does not agree to your offer, immediately start paying what you have offered. Make sure you do not offer to pay more than you can afford towards the arrears. All energy companies should agree, under a code of practice, to accept an offer of repayment in installments at a rate that you can afford. If the first person you speak to is unhelpful, ask to speak to someone higher up in the company.

Ask the energy company for a copy of their code of practice. This explains your rights and how to make a payment arrangement. Most energy companies will not disconnect you if;

• you agree to have a pre-payment meter installed;

• you agree to a payment arrangement;

• the debt belongs to a person who lived in your house before you; or

• it is between October and March and all the adults in the household are over retirement age. Some energy companies will also agree not to disconnect the supply between these times if any of the adults in the household have a severe illness.

If you are having problems making arrangements with the energy company, contact The National Debtline for advice.

Making complaints about your energy supplier
If you have to make a complaint about how your energy company is dealing with your arrears, you can contact Consumer Direct for help or you can complain to the Energy Ombudsman. The Energy Ombudsman deals with the complaints for Ofgem, who are the regulatory organisation for electricity and gas. Energy companies have to adhere to Ofgem guidelines that say they should take all of your circumstances into account when making an arrangement to pay any monies owed.

How you can avoid having your energy cut off?

Always keep paying for the energy you are using and an amount off your debt even while you are trying to make any arrangements. Add up your last four energy bills to find out the total amount for the year, and then divide this figure by fifty two to work out how much fuel you use each week. Check that your account is not based on estimates. Ask the energy company to take an accurate reading. The company should accept these following arrangements.

Installments
Maybe you could arrange to pay the energy bill by monthly or weekly installments, paying off the whole amount before the next bill arrives.

Pre-payment meters
You can pay for the energy you are continuing to use plus an amount you can afford off the arrears through a card, token or coin meter. You must be asked if you want a prepayment meter before your energy supply is cut off, if it is safe to install one.

Budget plans
The energy company works out how much energy you use over the year and you pay a fixed amount each week, every two weeks or every month. You can then spread any unpaid bill over the year and include it in the budget plan. If you can't afford the amount they are asking you to pay under the budget plan, ask for a special arrangement. They should let you pay off any debts at a rate you can afford, it might mean spreading the arrears over longer than one year.

Pre-payment meters and drawbacks
There can be problems to having a pre-payment meter. Your standing charge could be higher and if you cannot afford to buy the cards or tokens, you will then be without energy. Your pre-payment meter should be reset within a month of the price of fuel going up. Therefore arrears should not build up on your account. You can complain if this does not happen. If you are not in an arrears repayment arrangement, the energy company cannot insist that you have a pre-payment meter installed. You do have the option to ask for a pre-payment meter if you want one.

Direct payment schemes
Energy companies may tell you that there is no longer a direct payment scheme. Don’t let them put you off and make sure you apply to the Department of Work and Pensions as they make the decision, not the energy company. If you are on certain government benefits and you have been cut off, you could get a loan of a Community Care Grant from the Department of Work and Pensions to cover the cost of having your energy reconnected. You can't get help with arrears from the DWP except occasionally through a crisis loan.

Direct payments from Pension Credit, Income Support, Support and Employment Allowance, or Jobseeker’s Allowance
If you get any of the above and owe more than a set amount on your energy bill, you could ask the Department for Work and Pensions (DWP) to take weekly deductions from your benefit and pay them directly to the energy company. This is known as Fuel Direct and is part of the Third Party Deduction Scheme. This covers the energy you are continuing to use plus a small amount towards any arrears. Contact your Department of Work and Pensions office and tell the energy company that you are doing this.

More help

You can contact the social services department of your council or the DWP for help. The energy company will delay cutting off your supply if they are told the social services or DWP are looking
into your particular case. They will normally hold any action for ten working days but may agree to delay longer. This may give you time to make an arrangement to pay. In certain circumstances the Children’s Act 1989 gives social services the power to make payments to families with children.

More about energy charges
If you have to repay money from a prepayment meter after a theft, or to pay a bill in somebody else’s name, or if the energy company has set a token meter or budget scheme at a higher amount than you can afford, contact The National Debtline for advice.

More help from energy companies

A few energy companies have set up special funds that may be able to help you pay your energy bills if you are in difficulties. Ask your energy company if they run such a scheme or contact The National Debtline for details. You can download a utility trusts booklet from the British Gas Energy Trust website at www.britishgasenergytrust.org.uk.

Obtaining the best energy deal
You could save money by switching your energy supplier. This can be cheaper especially if you have electricity and gas from the same energy supplier. Check first which company is best for you. There
are many internet price-comparison websites who can help with this. Contact Ofgem or Consumer Direct for a list of these authorised companies. Make sure that your new supplier offers the same payment arrangements. You can usually complain about suppliers to the Energy Ombudsman. Energy suppliers should follow a code of practice when dealing with people in arrears.

How to complain about your supplier
Complain to the new Energy Ombudsman about a transfer or billing problem.

Specific problems for tenants

Landlords could be responsible for paying the energy for your accommodation, and then resell the fuel directly to you. Ofgem has set a maximum charge that your landlord can sell energy to you at. Get further advice from Consumer Direct about how much your landlord is allowed to charge you. Get in contact with your local advice agency or Consumer Direct if:

• you think you have been overcharged for fuel; or
  
• the company is threatening to cut off your energy supply because the landlord has not paid the bill.

Magistrates’ court fines

Magistrates courts can order you to pay a fine, for example, for an offence to do with driving, for not having a TV licence or for some other offence. You have to treat a magistrates’ court fine as a priority debt because if you do not pay then you could be sent to prison. If you have been sued for a credit debt such as a credit card or a loan, this would be in the county court and you cannot be sent to prison for this – treat it as a credit debt.

What type of court?
If you are not sure which type of court it is, or whether it is a priority debt, contact The National Debtline for advice. The court should take all of your financial circumstances into account when they decide the payment installments for the fine. You could be fined if you do not give the court accurate details of your outgoings and income when ordered to do so. The court can then make any deductions from your benefits or from your wages either when they set the fine or if you fall behind with payments. You must get in touch with the court if you cannot afford to pay the amount the court fixes or you cannot pay because your circumstances have changed. They can lower the amount. If you have to go to a court take a copy of your personal budget with you.

What happens if I don’t pay?

If you have arrears and do not make any arrangement with the court, they can try to do the following:

• They can make deductions from your wages under an attachment of earnings order. The amount they take will depend on your earnings. They can do this when they set the fine or if you have fallen behind with any payments.
• The court will usually make a ‘collection order’ which allows a fines officer in the court to deal with your case.
• The court can make deductions of five pounds a week from your benefits. They can do this when they set the fine or if you have fallen behind with payments.
• Clamp any vehicles registered in your name.
• Order you to do unpaid work instead of paying the fine.
• Include the fine in a register which could affect your ability to get credit.
• Increase the level of the fine by fifty per cent if they think you have deliberately refused or neglected to pay.
• From 1999, bailiffs should not take a vehicle you need to get to work or for your business. They must leave any clothes and basic household items. To make any arrangement to pay, you will need to contact the bailiffs directly, because the court will no longer accept payments from you.
• They could use private bailiffs to take any goods and sell them. From 2005, bailiffs collecting magistrates’ court fines have the power to break into your house, and other places, to take your goods, even if they have not been into your home before. They could take your vehicle parked nearby. If bailiffs threaten to break into your home, contact The National Debtline for advice.
• The court can order you to be sent to prison. There will be a court hearing before this happens and you must go with a copy of your personal budget. If you explain why you have not paid the arrears and make a new offer to pay by installments, the court may suspend the arrest warrant. The court should not send you to prison if you cannot afford to pay. They should only do this if they think you have ‘deliberately refused’ or ‘neglected’ to pay when you could have done so.

Hearings at the Court

• Make arrangements that you can afford to pay or contact the court if you cannot pay.
• Always go to any court hearings.
• Carry on to pay what you can afford.
• In extremely rare cases the court may order that your fine is written off.

Penalty charges for parking

Most local councils have made parking offences non-criminal and enforce parking penalty charges through the Traffic Enforcement Centre in Northampton County Court. There are rules that apply if you have this type of parking penalty. You can't be sent to prison but the local authority can ask the county court to use private bailiffs to try to recover the money owed. If you have a parking penalty charge, contact The National Debtline for advice.


Maintenance

The Court or the Child Support Agency can order you to pay maintenance as part of the separation or divorce process. The Child Support Agency was replaced by the Child Maintenance and Enforcement Commission in 2008. So this means some of the rules will be changing. Contact The National Debtline for further advice.

Maintenance through the court
If you have been ordered to make regular payments, you can apply to reduce the payments if you can't afford them. If you don't pay, the court can order you to go to a hearing to explain why you have not paid. The court can give you more time to pay and occasionally they can write off the arrears. If the court then decides that you are deliberately not paying, they could try to:

• get bailiffs to seize your goods and sell them;
• take any payments direct from your wages; or
• order you to be sent to prison.

Arrears with maintenance
If you are in arrears contact the court straight away and take a copy of your personal budget to any court hearings and explain why you cannot pay. The court can reduce the amount you have to pay.

Maintenance through the Child Support Agency

Child Support Agency (CSA) can decide the amount of maintenance you should pay and then collect it. This is most likely if your ex-partner is on benefits. They can decide the amount by using a set formula. If you still don't pay, the Child Support Agency can collect it direct from your wages, or most benefits without a court order. If the court can't do this, the Child Support Agency can ask the magistrates’ court for a ‘liability order’. If this happens they may try to:

• use bailiffs to seize your goods and sell them;
• seize money from your accounts;
• get a legal charge on your property;
• ask the court to send you to prison for up to 6 weeks but the court will only do this if it thinks that you are deliberately not paying; or
• ask the court to take away your driving licence for up to 2 years.

If the CSA has threatened any of these things, contact The National Debtline for advice.

Get in touch with the CSA if you are in arrears
If you have arrears, contact the Child Support Agency and try to make an arrangement to repay them. The CSA could accept an amount on top of what you are already paying to clear the arrears over an extended period. If there is a change in your circumstances, you should tell the Child Support Agency straight away.

Loans from the Social Fund

If you are on benefits, you may have taken out a loan with the Social Fund, or be thinking about asking for a loan. Repayments on the Social Fund loan are taken out of your benefit before you get it. This could actually mean you will not have enough money to live on. Do think carefully before accepting any loan. You could be eligible for a Community Care Grant instead. This is not actually a loan and you do not have to pay it back. If you have a Social Fund loan and the amount being taken from your benefit is causing you a real problem, contact the Social Fund officer at your local Department for Work and Pensions office. Take your personal budget sheet with you and explain the problems you are having. The Social Fund officer can reduce the weekly amount being taken out of your benefit. If they then refuse, contact The National Debtline for further advice.

If you are not on benefits how do you pay back a Social Fund loan
If you are no longer on benefits and still have a Social Fund loan, include it with your credit debts. But be careful, the DWP can take an amount out of other benefits instead. These benefits include contribution-based Jobseeker’s Allowance, Carers’ Allowance, Incapacity Benefit or Employment and Support Allowance, retirement pensions, Maternity Allowance and bereavement benefits. If this happens to you, contact The National Debtline for advice.

Overpayments of Benefit

The Department for Work and Pensions (DWP) could contact you and tell you that you have been overpaid a benefit and that they want you to pay this money back. They must tell you if the overpayment can be recovered from you and why. You can appeal if you don't agree that you owe the money. The law on overpayments is extremely complicated so before deciding whether to appeal, contact your local advice centre or contact The National Debtline for advice. They can make deductions from most types of benefits to collect overpayments, the only exception is Child Benefit. There are maximum weekly amounts that can be taken. If this causes you excessive hardship, contact the DWP and ask them if they can take less. They will usually not accept a proportion of the payment in line with your credit debts. Sometimes the DWP will agree to ‘write-off’ the overpayment if your repayments are causing you excessive hardship. You can ask your local MP to help. If you are not on any benefits, you can treat the overpayment in the same way as your other credit debts.

Special rules for Council Tax Benefit and Housing Benefit
Your council can say that you have been overpaid Housing Benefit or Council Tax Benefit and special rules could apply. Contact The National Debtline for advice.

Overpayments with Tax Credit

Sometimes you may be told that you have been overpaid Child Tax Credit or Working Tax Credit. If you don't agree that you have been overpaid, you could appeal. Contact The National Debtline for advice. Any overpayment can be recovered in many ways, including deductions from your ongoing claim or even through the same methods as a tax debt. If paying the tax credits back will cause you any hardship, you could reduce the amount at which you pay back. Speak to HM Revenue & Customs and ask for time and a rate that you can afford. Ask for a copy of their code of practice ‘What happens if we have paid you too much Tax Credit?’ In extreme cases of hardship, they sometimes consider writing off all or part of the debt. They could agree not to recover the overpayment if it is caused by a mistake by them and you have followed the correct rules for reporting any mistakes you spot and changes in your circumstances. Contact The National Debtline for advice if this is your situation.

Conditional Sale or Hire Purchase

You can buy many items on all sorts of credit agreements but with most credit you own the goods straight away and only owe the money to the creditor. The creditor can't ask you to send the items back you bought with most types of credit. As with hire-purchase or conditional-sale agreements, you do not own the items until you have paid the very last installment. The most common type of goods on hire-purchase agreements are cars.

What kind of agreement do you have?
If you have a conditional-sale or hire-purchase type of credit agreement, it should say this clearly. This information only covers hire-purchase or conditional-sale agreements which come under the Consumer Credit Act. If you are not sure what type of credit agreement you have, check your agreement or contact The National Debtline for advice.

Can the goods be taken back by my lender?

If you get into arrears with your payments, the lender may be able to ask for the goods to be sent back to them and then they will sell them to reduce your debt. You can't sell the goods yourself without the lender’s say so. If you have paid more than a third off the total amount owing, the items become ‘protected goods’. Meaning that the creditor must apply to the county court to ask for them back. They can't just come round to your house and remove them. Even if you have not paid more than a third of the total amount payable under the credit agreement, the creditor will need a court order or your consent to remove the goods if they are on ‘any premises’. This means that any goods inside your house are protected and cars as long as they are parked on your driveway or in your garage, they should be protected. If your car is on the road and you have not paid a third of the total amount owing, you could risk it being ‘snatched back’. The legal position about what happens to cars parked in car parks is not clear at all.

New rules about information from your lender
From 2008, lenders have to send you statements every year about your credit agreement. They also have to send you arrears notices if you miss two payments, along with an ‘information sheet’ telling you where to go for help. If your lender does not follow these rules, they may not be able to take further action against you or add interest and charges until they do. Contact The National Debtline for advice. If you have an arrears notice or default notice from your lender, you can apply to the court for a ‘time order’ under the Consumer Credit Act. If granted, you may be able to keep your goods, and make smaller payments to your lender. If you go into arrears with payments, the lender could repossess the goods. They do not need a court order first if you have paid less than a third of the debt. You can also return the goods voluntarily.

Have you paid back more than a third of the debt?
Paying back more than one third of the total owing, the creditor must go to court to ask for the goods to be returned. They can't come round and remove them. If your lender takes you to court, you might not have to return the goods, as long as you agree to make the payments that the court orders. This could be:

• normal payments plus something towards the arrears; or
• an amount which is less than the normal payments on the agreement. You have to show that this is all you can afford to pay and explain why it is important that you keep the goods (i.e. you need the car for work).

To make any offer, you should fill in the reply form to the county court claim and go to the court hearing.

Keeping the goods
If you want to keep the goods, you can include the payments in your ‘outgoings’ section of your personal budget and treat this as a priority and not a credit debt. Be prepared to explain to creditors why you need the goods (i.e. you need the car for work or you live in a rural area with very limited transport).

Voluntarily returning the goods

You could return the goods by writing to your lender to end your agreement. You can only do this 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 normally be asked to pay anything more. Once you have sent the goods back you can treat any debt you still owe as a ‘credit debt’ The law about conditional-sale and hire-purchase is fairly complicated. If you are behind with payments on this type of agreement contact The National Debtline for advice.