Debt advice

I’m not sure how much I owe. How do I get a copy of my credit file?

You can request a credit report online under the search “free credit report”. Some examples of companies who provide this service are:

• Equifax
• Experian
• Check my file
• Clear score
• My UK credit report

Your statutory credit report can be received in digital format or on paper.

What information is on my credit report?

• Address details, for example electoral roll information for your current address, plus any previous addresses.
• Financial credit agreements, for example loans, credit cards, mortgages and overdrafts. This includes any missed or late payments.
• Public records, for example county court judgments (CCJs), bankruptcies or insolvencies.
• Financial associates. If you have a financial associate - for example, someone you’ve taken out a joint mortgage with - lenders could take their financial behaviour into account when you apply for new credit

What data doesn’t appear on your report?

Data not recorded on your credit report includes your employment history, savings accounts, criminal records, medical records, ethnicity, religion or political affiliation.

All creditors information is not always reported on every credit report so if you know of further debt do not assume that it will not be pursued.

Can I get a criminal record due to non-payment of Council Tax after a visit by a Sheriff Officer?

This is not a criminal matter. Sheriff officers enforce mainly civil debts. This, therefore, will not leave you with a criminal record or damage your credit file.

Basically, each March/April you will get your annual Council Tax Bill After that you then paid your Council Tax off in ten monthly instalments and get two “free” months usually at the end of the financial year (February and March).

However, if you miss any of the 10 payments, you then get a 7-day letter informing you that you have to make up the missed payment. If you don’t make the payment in that time or miss another payment later, you should then receive a 14-day letter demanding the full amount outstanding. If you don’t pay that, the Council issue a Summary Warrant which is a special type of Court Order that Councils can use, using a Sheriff Officer.

The debt is then sent to Sheriff Officers, who can recover the debt using debt recovery processes in Scotland, known as Diligence and can include things like wage and bank account arrestment.

You can register a Statutory Moratorium for free and online and this will protect you from Sheriff Officers if you are worried about these things and this gives you six months to get advice or, to repay the debt, if you can. You can get advice by emailing fit@northlan.go.uk

The thing you have to remember is you will get another Council Tax Bill in March, which you will have to start paying in April, or you will get another 7-day letter and the whole process will begin again. Your, therefore, best trying to repay as much as you can before April, so hopefully you can clear your feet. You can also contact the Sheriff Officers and see if they will enter into a repayment plan with you.

If they won’t you can look at the Statutory Moratorium or email fit@northlan.go.uk for advice.

What is bankruptcy?

Bankruptcy is a formal method of dealing with debts if other options have failed, this is a last resort. In Scotland, bankruptcy is sometimes called sequestration.

Both of the processes below will have an adverse effect on your credit profile for a number of years preventing you taking out further debts. There is also a fee for both unless you are in receipt of certain benefits.

What is a Statutory Moratorium?

A Statutory Moratorium is a period of debt relief during which creditors cannot take any action against you for debts you owe them.  If you are thinking of applying for bankruptcy, a trust deed or Debt Arrangement Scheme (DAS) and require more time to think things over but are concerned about what your creditors could do in the meantime, you could request a Statutory Moratorium.

If your Statutory Moratorium is granted, the Accountant in Bankruptcy will register this on the Register of Insolvencies and the DAS Register. From this date, you then have six months to decide if you want to proceed with an application. If you are granted a trust deed or bankruptcy then any interest, fees or charges will either be settled or written off once completed. Under DAS, these will be written off on completion of the debt payment programme.

Can I lose my home if I do not pay my debt?

If you live in rented accommodation, you must maintain your rent payments to retain your home. Non-payment of other debts, including Council Tax does not threaten your tenancy, unless specifically listed as a condition of your Tenancy Agreement (which is very rare).

If you live in a mortgaged property, you must maintain your payments to your mortgages and any other debts which are “secured” against the property. Failure to do so can result in a lender seeking “re-possession” of the property. Such an option is expensive for creditors and time-consuming; therefore, a lender will try to avoid such an action by agreeing an alternative means of clearing the debt or bringing payments up to date.

If you do not maintain payments to “unsecured” creditors they cannot seek “re-possession”, however they can take legal action against you which can result in them being awarded an “Inhibition” against you which may stop you selling the property without their consent. A creditor may also seek to “Bankrupt/Sequestrate” an individual if they do not maintain payments to their debt.

If a “Bankruptcy/Sequestration” award is granted it is possible that your house could then be “at risk”. Again, this option is time-consuming and expensive with creditors trying all alternative options before taking this step.

What help can I get from a Debt Adviser?

The Money Advice process

Our money advice process follows 5 steps that are the same for everyone that is struggling with problem debt and all our advisers will follow this well-established process.

Gather all relevant information

Firstly, we will gather information about your current situation whilst taking a holistic and non-judgemental approach in dealing with your debt. This will include gathering all related information about your debt, health and household details. We will also look at your current financial position with regards to income and expenditure

Help and deal with emergencies

Often the reason why you are looking for debt advice is due to a recent emergency in your life. We understand that this can be a stressful time and we would look to resolve this as soon as possible.

Discuss income and expenditure and maximise income

We would look to complete an Income and Expenditure document and advise on minimising your expenditure while looking at ways in which you could maximise your Income. We can assess if you require a benefit check and ensure that you are not paying any unnecessary bank charges etc.

Assist with detailed income and Expenditure Document

When all information is gathered a detailed Income and Expenditure document will be drafted with assistance from the Debt Adviser as it is crucial that we confirm what you can or cannot afford to pay your creditors from your current income.

Discuss all the options open to you

From the four steps above we can discuss the options that are available to you having completed our findings.

The discussion will follow with a qualified Debt Adviser however the final decision will be for you to make an informed decision and not the adviser making it for you.

If this sounds like the type of help you are looking for please get in touch with the Financial Inclusion Team by emailing fit@northlan.gov.uk or calling 01698 332551.

Can I be sent to prison for not paying my debt?

With the exception of debts due for child maintenance or alimony for an ex-partner you cannot be sent to prison for not paying your debts in Scotland. There are several legal options available to creditors if they try to enforce payment of debts, but these do not include imprisonment. It is worth noting however, that should a person be fined in court for not paying a debt (which in itself is very rare), then not paying the imposed fine could then result in a custodial sentence although still very unlikely as there are a number of alternative options which could be imposed instead.

When can creditors do a Bank Arrestment?

Bank Arrestments are a form of diligence in Scots Law, which are a legal form of debt recovery and must be executed by a Sheriff officer or a Messenger at arms. As both Sherriff Officers and Messenger at Arms are officers of the Court, this means bank arrestments can only be executed if your creditors have obtained the authority of the Court to carry out the Arrestment.

Authority of the Court

If the debt is a consumer credit debt, like a credit card, overdraft, or personal loan, then the firm that is owed the money must take you to court and obtain a court order known as a decree.

Once the Court has awarded the decree, they must then wait 14 days to allow you to appeal any decision, before applying for an extract of the decree. Once this has been issued, they can then provide this to a Sheriff Officer or Messenger at Arms and instruct that they execute the arrestment on your bank account by delivering it to the bank that holds your accounts.

To do this, they must know what bank you have your account with. This is one reason you may not wish to provide creditors your bank account details when you are struggling to pay your debts.

How much can the creditor take in a Bank Arrestment?

There is no limit to how much funds a creditor can take when they arrest your bank account.  They can seize the full amount owed (including interest and charges) and their legal costs and the costs of executing the arrestment itself.

Minimum Protected Balance

There are protections on how much the creditor must leave in your bank account, however. This is called the Minimum Protected Balance and means £529.90 must be left in your bank account.

When does a Bank Arrestment become effective?

The important date of an arrestment is the day it is served on your bank. This is the date of execution. The date of execution is important, as only the funds in your account on this date can be arrested. If there are no funds in your account on this date the arrestment fails, even if the next day £1,000, for example, is paid into it.

When will a Bank Arrestment fail?

Banks Arrestment will fail when there are no funds in your account. They will also fail if your account is in overdraft of the funds available on the date of execution are less than the Minimum Protected Balance.

Can I challenge a Bank Arrestment?

Bank Arrestment can be challenged. There are two main means of doing so. One is submitting a Notice of Objection, the other is applying for it to be recalled or restricted on the grounds it is unduly harsh.

Who can receive an Earnings Arrestment Order?

Most people who are employed can have their wages arrested. However, there are some exceptions:

• You must be employed, not self-employed
• You must not be receiving any unemployment benefits such as Income Support, Employment and Support Allowance (ESA) or Job-Seeker’s Allowance (JSA)
• Serving members of the armed forces are exempt from wage arrestment
• The debt must be in excess of £50
• Your earnings must also be above the threshold

How much can be deducted from my wages if an arrestment is granted?

Wage Arrestment

• Though wage arrestment is intended to be punitive and to ensure that any outstanding debt gets paid off, there are restrictions in place to ensure that you are left with enough money for any necessities.
• The amount that will be taken from your wages to pay off the debt depends on how much and how frequently you are paid. All deductions are made from your net income (after tax).
• A portion of your income is completely exempt from Wage Arrestment. A percentage of the remainder of your earnings is deducted and sent to your creditor.
• You can calculate the amount that would be deducted from your earnings using the table below:

Are families responsible for debt after death?

Debt isn’t inherited in the UK, which means that family, friends or anyone else cannot become responsible for the individual debts of the deceased.

You’re only responsible for the deceased person’s debts if you had a joint loan or agreement or provided a loan guarantee. So in short you aren’t automatically responsible for a spouse’s or registered civil partner’s debts. And while the Personal Representative is not personally liable for the debts of the deceased, those debts are likely to have to be paid from the estate of the deceased.

Do credit card debts die with you?

A common misconception is that any credit card debts are automatically written off. Instead, any individual debts must be paid using the money the deceased has left behind. Only if there isn't enough money in the Estate may the debt be written off.

Who pays my debts when I die?

Your debts become the responsibility of your estate after you die. The Executor of your estate is the person(s) responsible for dealing with your Will and Estate after your death. The Executors or Administrators may be liable to pay Inheritance Tax on property that forms part of the deceased’s estate and will use your assets to pay off your debts.

If two or more people have taken out a loan jointly in their names, in most situations the outstanding debt will pass in full to the surviving people who took out the loan.

If there is a mortgage, then your surviving spouse, registered civil partner or cohabiting partner, for example, must pay that mortgage but is not required to pay any of your other debts.

If you are joint tenants, your home does not form part of your estate, except for the purposes of calculating Inheritance Tax. Following the death of one tenant, the surviving tenant automatically gets the deceased’s share (and ownership) of the joint tenancy property.

If you are the sole owner, then again the executor will usually use any assets to pay off debts. Depending on how much is owed, this could potentially involve selling off the property.

The situation is the same if you are joint owners under tenancy in common; that is, the property’s equity is owned in defined shares by two people. After the death of a tenant in common, their share passes not automatically to the survivor (as with joint tenants) but according to the deceased’s will or, if there is no will, via intestacy rules.

A joint mortgage and a joint current account with an overdraft are examples of joint debt.

What happens if I can't afford to pay my Hire Purchase (HP)?

Hire purchase (HP) is a type of borrowing. It is different from other types of borrowing because you don’t own the goods until you have paid in full. Under an HP agreement, you hire the goods and then pay an agreed amount by instalments. While you are still making payments, you aren’t allowed to sell or dispose of the goods without the lender’s permission. If you do, you’ll be committing a criminal offence.

The lender may be able to repossess the goods if you fall behind with payments

You might be able to get your payments reduced or paused. Contact the company - they should work with you to stop your debts from getting worse.

The company should give you time to consider your options and get help with your debts.

Your lender should only repossess something if they can’t get the money back another way.

Make sure you tell your lender if you’re in a difficult situation - for example, if you’ve lost your job. They might agree not to repossess something if it would make your situation worse.

Your lender should keep you up to date about their plan for repossessing your goods. They should also explain how your payment plan will work if you’ve asked for a delay - for example, it’s likely to increase the debt you owe or extend the length of time of the HP agreement.

You can end an HP or conditional sale agreement in writing and return the goods at any time. This can be useful if you can no longer afford the payments, or you don't need the goods anymore.

You will have to pay all the instalments due up to the time you end the agreement. If your payments come to less than half of the total price of the goods, you might still have some money to pay as the lender is entitled to this amount under the agreement. If you have already paid more than half of the price when you end the agreement, you can't get a refund, but you usually won't have to pay any more

Lenders sometimes say you must pay the whole amount owed under the agreement before you can end it.