People generally find themselves in debt when their outgoings exceed their income.
You’ll be responsible for a debt if it’s something that the law says you have to pay, like council tax or water charges. You’ll also probably have to pay a debt if you’ve signed a contract to say you agree to give money to someone. This could be something like a:
- credit agreement, for example if you’ve bought a washing machine or taken out a credit card
- tenancy agreement, if you rent
If you’re responsible for a debt it’s called ‘being liable’. It means you’ll have a legal duty to pay it. If you’re not liable you should be able to challenge the creditor.
A creditor is any person or organisation you owe money to.
Collect together all the information about your debts, such as contracts, bills and statements.
Your debts might for example include:
- rent arrears
- credit card debts
- council tax arrears
- energy or water bills
- money you’ve borrowed from friends or family
Make a list of your debts and write down the details of each debt. These details might include:
- who you owe the money to - this is your ‘creditor’
- when you first missed a payment
- how much you owe - this might be in a recent statement
- your account or reference number - this might be at the top of your statement
- what the creditor has done to get the money back - for example, sending you letters or taking you to court
When my household income in spite of a reduction of the living standard, is insufficient to discharge all payment obligations over a long period of time.
It could be time to get help with your debt if you are
- regularly worrying about money
- struggling to make end meet
- struggling to pay your household bill or paying them with credit
- relying on your overdraft or credit card to get by
- missing credit (card) repayments
- hiding your spending habits from your family
- avoiding letters and calls from your creditors
If you owe debts to several creditors and are struggling to cope, you should seek advice as soon as possible.
Debt advice and counseling helps citizens get an overview of their finances and debt, and help them manage their finances in a way that improves their financial standing. Free and independent advice is available through a number of debt advice organisations. They can provide face to face, telephone, and online advice.
A debt adviser should always work in your best interests. They assess your needs and explore all options available to you. Any emergencies are dealt with and your adviser may ask to see copies of credit or other agreements to confirm you are actually liable for the debt. They do not do anything without your consent.
Debt advisers usually have an academic degree in social work, psychology, law or economics.
There are many factors to consider in relation to your liability for debts. If unsure, always seek free independent debt advice.
- Your husband, wife or civil partner has died.
If your spouse or civil partner had debts in their sole name before they died, you are not usually liable for them. Their estate remains liable, and any debts must be paid out of this if there is money available. This can extend to jointly owned property. Check if your partner had insurance policies that cover debts in the event of death.
- You are a guarantor for a credit agreement
If you signed a credit agreement as a guarantor to enable someone else to take out credit, you are jointly and severally liable for the debt if they are unable to make payments. Check your obligations under the terms and conditions of the credit agreement and seek advice if the person who took out the credit agreement is unable to repay. If you make repayments as a guarantor towards their debt, you have a right to claim the money back from them.
No. You cannot go to jail for owing a debt.
P2P lending is an alternative form of borrowing and lending that eliminates traditional financial institutions. It is a form of crowdfunding where lenders and borrowers are connected through online platforms.
The process begins when a borrower applies for a loan and states the amount and purpose of the loan. After that, P2P lenders review applications and decide whether to lend out the requested amount. If approved, the loan is funded by multiple lenders.
One of the primary risks of P2P lending is that your investments and data may not be secure. It is essential to consider the security measures taken by the P2P platform you are using, such as encryption of data, authentication measures, and any other security protocols in place.
Additionally, it is important to understand the rights of lenders and borrowers on the platform, including repayment terms. Knowing these terms clearly can help protect your investments and data from potential scams or losses.
Peer-to-peer (P2P) lending fraud is a severe problem.
Avoiding P2P lending fraud includes:
- researching potential lenders;
- verifying the lender’s legitimacy;
- understanding all terms and conditions associated with the loan.
It is crucial to only lend money to those with a good credit history but only accept loans from trusted sources. By taking these steps, you can help protect yourself from becoming a victim of P2P lending fraud.
Priority debts' are debts that can cause you particularly serious problems if you don’t do anything about them. You need to work out which of your debts are priority debts and deal with them first.
- Rent arrears
This is a priority debt because your landlord might evict you from your home if you don’t pay.
Before your landlord can evict you, they’ll need to go to court to get a ‘possession order’ - this says when you have to leave. If you don’t leave by the date on the possession order, your landlord can ask the court to set a date for your eviction.
- Mortgage arrears or secured loan arrears
These are priority debts because your bank or building society might evict you and take your home if you don’t pay.
Before they can evict you, they’ll need to go to court to get a ‘possession order’ - this says when you have to leave. If you don’t leave by the date on the possession order, your bank or building society can ask the court to set a date for your eviction.
- Council tax arrears
This is a priority debt because your local council might take you to the magistrate’s court if you don’t pay.
If you have the money but choose not to pay when the magistrate’s court tells you to, you could go to prison. You won’t go to prison if you can show you can’t pay.
- Gas or electricity bills
If the debt is with your current supplier it’s a priority because they might cut off your gas or electricity if you don’t pay.
- Internet or telephone bills
These might be priority debts because your supplier can cut off your phone or internet if you don’t pay.
They're only priority debts if it’s really important that you can use a phone or the internet. You might, for example, rely on them because you:
- have a disability or long-term health condition
- need them for your job
- are looking for work
- Court fines
These are priority debts because you could be sent to prison if you have the money but choose not to pay. You won’t go to prison if you can show you can’t pay.
You might get a court fine if you commit a crime, for example:
- speeding or breaking other rules while driving
- speeding or breaking other rules while driving
- Tax debts
This is a priority debt because if you don’t pay, the tax office can:
- take the money from your wages
- take the money from your benefits or tax credits
- use bailiffs to take your property
The tax office will warn you if they’re going to do this but they don’t have to go to court first.
If you have the money but choose not to pay the tax debt, the tax office can take you to court. If you don’t go to court when asked or don’t do what the court tells you to, you could be sent to prison.
- Payments for goods bought on hire purchase or conditional sale
If you buy something on hire purchase or conditional sale, you pay for it in instalments and you don’t own it until you finish paying. If you’re not sure if you bought something on hire purchase or conditional sale, check your contract.
This might be a priority debt because the creditor could take back the goods you bought. If you keep the goods in your home or you’ve paid back more than a third of the cost, the creditor has to go to court to do this.
Hire purchase and conditional sale payments are only priority debts if the goods you bought are really important. For example they might be really important if you need them to:
- get around - such as a car if there’s no public transport
- cook food
- store medicine - such as a fridge
- Unpaid child maintenance
This is a priority debt because the Child Maintenance Service can take the money from your wages or bank accounts if you don’t pay.
They’ll warn you if they’re going to do this but they don’t have to go to court first.
If you have the money but choose not to pay, the magistrate’s court can:
- take away your driving licence or passport for up to 2 years
- send you to prison
- Health Insurance
If you do not pay or getting into arrears the health insurance might not take over your treatment costs.
If you’re struggling to keep up with your regular payments, your creditors may agree to a short-term payment holiday.
If you’re considering asking for a payment break, you’ll need to give your bank, local authority or landlord some information to support your request. They’ll probably want to know about your income, living expenses, any other debts and any change to your financial situation. You do this by creating an income and expenditure form based on your budget. You'll need to tell your creditors the reason you're asking for a payment break and when you'll be able to start making normal payments again. If your creditors agree to a payment break, ask them to send you a letter or email to confirm this.
Payments you should have made will need to be paid after the payment break ends, either by increasing the amount of your future payments, or by adding extra months to the end of the agreement so it takes longer to pay back.
Mortgage payment holidays are in place for people who are struggling with their repayments. You can apply for one if you've kept up-to-date with your payments.
The threat of bailiffs is a worrying thought. Our top ten tips on how to deal with bailiffs can help put your mind at ease.
- don’t ignore the situation. If you’ve got to the stage of bailiffs getting involved, things will only get worse if you ignore it. It’s never too late to get in touch with your creditor and offer a payment you can manage.
- If you receive a visit from a bailiff, try to keep calm and don’t act aggressively - getting angry or attacking the bailiff will make things a lot worse, and could even result in you getting arrested.
- If you’re expecting a visit from the bailiffs, keep your doors locked at all times and make sure everyone in the house – including children – knows not to open the door to someone they don’t know. Fit a door chain if you can in case someone accidentally opens the door to a bailiff.
- When a bailiff visits, don’t open the door to them. You can speak to them through the letterbox or from an upstairs window. You can ask them to return to their vehicle and speak to them there. If you do this, make sure you lock your door behind you. There are some situations when it can be best to let the bailiff in, but you must think very carefully before doing this, and we strongly recommend you don’t open the door to them unless you’ve had expert debt advice.
- Always ask to see proof of ID and a copy of the warrant or writ. The bailiff can hold these up to a window or show you through the letterbox.
- Keep all paperwork you get from a bailiff, and always get a receipt for any payments you make.
- If a bailiff has made a list of your goods and asks you to sign a controlled goods agreement, you should do this. If you don’t sign it, they’re much more likely to take your goods straight away. If any goods listed aren’t yours, ask for them to be removed, or write ‘not mine’ next to the item.
- If you sign a controlled goods agreement, make sure the payments you’re agreeing to make are realistic. If you miss payments because you can’t afford them, the bailiff may take your goods away.
- You can hide goods in your house or take them somewhere else before a bailiff visits, but if you hide or remove goods after the bailiff has visited and listed them, you’re committing a criminal offence.
- Cars are an easy target for bailiffs – they’re hard to hide and easy to sell. If they know you have a car, bailiffs will look hard for it, so park well away from your home, preferably in a locked garage. However, if the bailiff has already found your car and listed it, it’s too late and hiding it could be a criminal offence.
If a debt has been owed for a long time, the original creditor may employ another company to contact you, or they may sell your debt to another company. The companies that buy these debts are debt collection agencies. The letters you get from them will look different. Sometimes collection agency letters will come from solicitors and they may talk about court action. You may also get phone calls from the collection agency asking you to pay. It can be confusing to get letters from new companies about your debts, but the most important thing to remember is the collection agency has no extra legal powers. They are not bailiffs, and they cannot do anything more than the original creditor.
The garnishment protection on the P-account takes place in three stages. At the 1st level, there is automatic garnishment protection on the P-account, i.e. the debtor does not have to do anything if his/her payment account is already managed as a P-account.
At the 2nd stage, a certificate of the increase amounts must be submitted to the credit institution.
At the 3rd stage, protection against seizure must be ensured by an application to the enforcement court or the enforcement office of the public creditor (e.g. tax office).
The account garnishment protection extends to all incoming money on the P-account up to the amount of the garnishment-protected amount (basic allowance plus any increases). So as long as a receipt of payment is within this range, it does not matter whether it is a salary, the purchase price refund from an Internet purchase or an inheritance.
Yes. If the balance of the payment account has already been seized, the debtor may request that the payment account be maintained as a P account at the beginning of the fourth business day following the declaration of conversion.
Yes. P-accounts can be opened by natural persons, including the self-employed.
P-accounts are to be offered at the generally accepted account management prices. Credit institutions can therefore agree with the customer on the fees that are usually agreed between the account-holding credit institution and the customer for maintaining a general payment account with corresponding services.
No. The P account may only be managed on a credit basis. Other agreements with the credit institution, remain unaffected and are subject to the freedom of contract between you and the credit institution.
No. Multiple account garnishment protection would be abusive and would put the creditor at a disadvantage; this may be punishable by law.
Co-Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or EISMEA. Neither the European Union nor the granting authority can be held responsible for them.