Some debts are more important than others. The law gives different creditors
different ways of getting their
money back. If you don’t act quickly some creditors could:
The debts where these things could happen if you delay too long are:
| Debt | Possible Result |
| Rent arrears | Loss of your home |
| Mortgage arrears | Loss of your home |
| Council tax arrears | Bailiffs / imprisonment |
| Electric / Gas arrears | Electricity or gas cut off |
| Magistrates fines | Bailiffs / imprisonment |
| Child maintenance | Imprisonment |
| Income Tax arrears | Bailiffs / imprisonment |
| VAT arrears | Bailiffs / imprisonment |
| Hire Purchase arrears | Repossession of HP goods |
The above are all priority debts. It is
important to use your MONEY FOR CREDITORS figure to make
agreements and settle these debts first.
What if you owe......
RENT
MORTGAGE PAYMENTS
COUNCIL TAX
GAS OR ELECTRICITY PAYMENTS
CHILD MAINTENANCE PAYMENTS
HIRE PURCHASE PAYMENTS
IF YOU OWE RENT
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If you have rent arrears, your landlord can take you to court and seek
possession of your home. You need to
give priority to the payment of any rent arrears in order to protect your home.
If you have arrears:
1. CONTACT YOUR LANDLORD IMMEDIATELY and
try to make an agreement with them. If you
can’t, get advice straight away.
- If you rent from a Housing Association…
Contact the Association straight away – the address and phone number will be on your rent book / card.
The Association will expect you to pay your current rent each week, plus what you can realistically afford
towards your arrears.
Use your personal budget to work out how much you can afford. The money towards your arrears comes
out of your Money for Creditors. You could show your personal budget to the Association staff to
reinforce your offer. You may need to keep up these payments over a long period, so do not offer to pay
more than you can afford – this will only make the situation worse. Do not be frightened of making a
small offer if it is all you can afford.
If you are on Income Support, you can have a standard amount taken from your benefit and paid to the
Association. This way the landlord can be sure of getting their money, even if it takes a long time.
You may be able to reduce the amount of rent you pay if you are in receipt of benefits or a low income by
claiming Housing Benefit. If in doubt claim.
It is nearly always possible to make an arrangement to stay in your home, but you must talk to your
Housing Association.
- If you rent from a Private Landlord…
If your landlord wants you out of the property, they must go to court. If they harass you, or try to get you
to leave without a court order, they are breaking the law. Get advice immediately.
Use your personal budget to work out how much you can afford to pay your landlord. They will want you
to pay your current rent each week, plus what you can realistically afford towards your arrears. The
money towards your arrears comes out of your Money for Creditors. Put your offer to your landlord in
writing and keep a copy if you can. Do not be frightened of making a small offer if it is all you can afford.
If you are on Income Support, Income-based Job Seekers Allowance or Pension Credit, you can have a
standard amount taken from your benefit and paid to the landlord. This way the landlord can be sure of
getting their money, even if it takes a long time.
You may be able to reduce the amount of rent you pay if you are in receipt of benefits or a low income by
claiming Housing Benefit. If in doubt claim.
You may have the right to stay in your home – this will depend on what kind of tenancy you have.
However, if you owe your landlord 13 weeks rent and your landlord goes to court, the court will almost
always say that you must leave your home. If you owe more than 13 weeks rent get some advice as soon
as you can.
2. WHAT IF THE LANDLORD REFUSES YOUR OFFER?
If you have made a reasonable offer, and your landlord has refused to accept it,
start paying what you can
afford. Pay the normal rent plus some money towards the arrears. This will help
if your landlord takes
you to court. If your landlord makes it difficult for you to pay – for example
by not calling for the rent –
get advice.
3. WHAT IF THE LANDLORD TAKES YOU TO COURT?
There are five stages to the legal procedure to get you to leave where you live:
- Notice – The landlord sends you a legal document called a Notice to Quit or a Notice Seeking
Possession.
- Summons – The court sends you a County Court Possession Claim Form. This tells you the legal
reasons why the landlord says you have to leave. It also tells you the date and time when the case will be
dealt with in court. You need to reply to this so get advice.
- The Court Hearing – The court hearing takes place in public before a County Court Judge. The
procedure is very formal, and it can be intimidating. You will have a better chance of getting your side of
the story across if someone speaks for you who understands the procedure.
If your landlord is a Housing Association it is likely they will have a
representative at court who you can
talk to before the hearing. You may be able to reach an agreement with them
before the case is heard.
Private landlords may speak on their own behalf, or they may have a solicitor
to represent them.
4. THE JUDGE MAKES A DECISION
If the case is just about arrears, the most likely outcome is that the judge
will make a Suspended
Possession Order. This means that the court orders you to regularly pay the rent
plus an amount off the
arrears. If you pay this you cannot be evicted.
The judge may decide that you will lose your home. In this situation the judge
makes an Order for Outright
Possession which means that at the end of a set period (usually 28 days) you
must have left your home.
If no decision can be made, the judge will adjourn the case to be heard on
another day.
5. EVICTION
You can only be evicted in two situations:
- The judge has made an Order for Outright Possession.
- The judge has made a Suspended Possession Order and you have not kept up with the payments.
If this happens, you will get a letter from
officials called County Court bailiffs. The letter is a Warrant of
Possession. It gives the date and time when the bailiffs will come to make you
leave your home. Nobody
can force you leave before then.
It is best if you have left and removed your belongings before the bailiffs
arrive. If you have not left when
they come, the bailiffs have the right to break in and force you to leave.
However, they will not take your
belongings out of the house. You would need to ask permission from the landlord
to go back into the
house and get your things back.
This process can be stopped at any stage by making an agreement with your
landlord, and sometimes
going back to court.
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IF YOU OWE MORTGAGE PAYMENTS
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THIS SECTION APPLIES TO FIRST MORTGAGES, SECOND MORTGAGES AND
SECURED LOANS
The first mortgage is the one you took
out to buy your home. A second mortgage, also known as a secured
loan or a second charge is a separate loan secured on your home.
Check all of your loan agreements to see if they are “unsecured” or “secured” on
your home. If they are
“secured” this means that the lender can ask the court to “repossess” your home
if you do not keep up the
instalments. They will then sell off your home to pay off the debt to them. So
you should treat secured loans
as priority debts.
WHEN SHOULD I CONTACT MY LENDERS?
Do not delay contacting your lenders to explain your difficulty. It is never too
early or too late to come to an
arrangement.
WHAT PAYMENT ARRANGEMENTS WILL MY LENDER ACCEPT?
You will usually have to pay extra each month to clear the “arrears”, the amount
you owe. The lenders will
often ask for the arrears to be cleared over 12 to 24 months. But they can also
agree a longer period for you
to pay what you owe – in some circumstances up to the remaining years left on
your mortgage.
If you are unable to clear the arrears as quickly as your lender is asking you
to, contact them and explain
why you can’t e.g. illness, separation, loss of job, etc.
If your home is worth far more than the amount outstanding on your mortgage,
tell the lender. The more
your home is worth, the less risk your lenders are taking in giving you more
time to clear your arrears by
instalments.
Occasionally your lender may agree to you:
HOW DO I DEAL WITH MY SECOND MORTGAGE?
Companies offering secured loans or second mortgages are generally less tolerant
of arrears because they
have fewer rights than your main lender to any money if your home is
repossessed. So they usually apply a
lot of pressure to get you to pay, and sometimes go to court very quickly after
you miss a payment. This can
make reaching an agreement difficult. Try offering an extra amount on top of the
monthly payment to clear
the arrears in 12 to 24 months. If you can’t manage this get some advice.
You may be able to apply to the County Court to get your normal monthly payment
reduced. This is called a
Time Order. If you think this would help get some advice.
WHAT IF THEY REFUSE TO NEGOTIATE?
Start paying what you can reasonably afford to pay, which should be your monthly
payment plus something
off the arrears. This will help your case if it goes to court.
WHAT IF MY LENDER TAKES ME TO COURT?
You have rights if you are taken to court. Get advice
IF YOU OWE
COUNCIL TAX
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If you do not pay, the
Council can take court action which may lead to:
- Money being taken from your wages or Income Support or income-based Job Seekers Allowance or Pension Credit, or
- Your goods being taken away by bailiffs to be sold, or
- Bankruptcy, or
- As a last resort, you can be sent to prison.
Each April you will get a new bill that you can
pay in ten monthly instalments. If you want to pay your bill
weekly or fortnightly ring the Council Tax section.
WHAT CAN YOU DO ABOUT ARREARS?
Contact your Council Tax Office and make them an offer from your Money for
Creditors. They will usually
want you to pay off your Council Tax arrears before you get the next bill. If
you cannot afford this, tell them –
use your Personal Budget to work out what you can afford to pay. Start paying
the amount you have offered
immediately.
CAN YOU REDUCE THE BILL?
There are several ways you may be able to pay less:
- Council Tax Benefit – You can get this if you are on a low income or on Income Support.
- Second Adult Rebate – You may be able to get this if other adults living with you are on low income or on Income Support.
- Single Person Discount – You can claim this when you are the only adult living in the home
- Reductions for Other Groups of People – People such as carers, students, youth trainees and severely mentally disabled people don’t count for Council Tax purposes.
- Disability Reduction – If you are disabled, or someone you live with is disabled, and your home has Certain facilities the disabled person needs, you may be entitled to pay less Council Tax.
WHAT WILL HAPPEN IF YOU DON’T PAY?
The Council will go through three steps to try and make you pay what you owe:
1 If you do not pay, the Council will get a Liability Order from the
Magistrates Court. Unless you make an
arrangement and keep to it, they can:
- Take money directly from your wages or Income Support, income-based Jobseekers Allowance or
Pension Credit
and
- Send a bailiff to your home. Even at this stage, it is possible to make an arrangement to pay. If you do not
make an arrangement, the bailiff will take away your possessions and sell them at auction to pay your
debt. Important: You do not have to let a Council Tax bailiff into your home.
and
- If you own your own property or have other valuable assets the Council may be able to make you bankrupt.
2 If the Council can’t get any money using the powers above or if you
have not made an arrangement to pay
what you owe, they can ask the Magistrates Court to consider whether you should
be sent to prison.
If the court is considering sending you to prison, you will be sent a legal
document called a Summons.
This will give you the legal details of the case, and tell you the date and time
when the case will be heard.
You must go to court. Take your Personal Budget with you and explain your
problems. The Magistrates
will usually give you time to pay. If are unable to pay, you can ask them to
write off your arrears – or cancel
them. You can only be sent to prison if you can pay and won’t pay – or if you
have not bothered to pay.
3 If you agree to pay your Council Tax this way, you must make every
effort to stick to the arrangement you
have made. If you are unable to afford the amount set, go back to the
Magistrates. Court and ask for the
payments to be reduced. Do not just stop paying. If you do this, the
Magistrates’ Court will issue another
warrant for your arrest. If you are sent to prison the Council cannot use any
other methods to get you to
pay that bill.
IF YOU OWE GAS OR ELECTRICITY
PAYMENTS
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Your gas and electricity
can be cut off if you don’t pay your bill within about five weeks of getting it.
This only
applies if money is owed to your current supplier.
The company must accept what you can really afford to pay towards your arrears,
even if this means it will
take you years to pay them off.
Pay as much of the bill as you can and talk to the company about how you can pay
off the rest using your
Personal Budget and by making an offer using your Money for Creditors.
They should offer you:
Important: You can only be cut off for actual
gas or electricity bills. You cannot be cut off because you owe a
company for goods you have bought on credit.
Back to top
IF YOU OWE CHILD MAINTENANCE
PAYMENTS
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Since April 1993 the
Child Support Agency began to take over from the courts responsibility for
calculating
and collecting child maintenance.
Arrears of child maintenance are a priority debt as the Child Support Agency has
the power to:
You should try to make an agreement to pay what
you can afford. Make an offer out of your Money for
Creditors.
If you have any problems with this, get some advice (see page 19).
IF YOU OWE
HIRE PURCHASE PAYMENTS
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Most goods bought on
credit are not bought on hire purchase (HP).
You have only bought something on hire purchase if you have a Hire Purchase
Agreement or a Conditional
Sale Agreement. If you have one of these agreements, the company owns the goods
until you have made the
final payment. These agreements are mostly used for cars.
Check what sort of agreement you have. If you are not sure, ask the creditor or
get some advice.
With all other forms of credit, you own the goods straight away and the creditor
has no right to have the goods
back if you owe them money. The money you owe is simply a credit debt and is not
classed as priority debts.
If you have paid less than a third of a Hire Purchase Agreement, the company has
the right to get the goods
back. They do not need to go to court. If you have paid more than a third, the
company need to go to court
before they can get the goods back from you. If you have paid a half or more of
a Hire Purchase Agreement
you can surrender the goods and will be liable for no further payments unless
there are arrears which you
must pay.