Can I be taken to court for debt in Scotland?

The ongoing cost-of-living crisis and rising cost pressures for Scottish businesses are pushing debts to problematic levels for many. Whether it’s credit card bills, overdraft debts, mortgage and rent arrears or tax liabilities, many Scots are increasingly concerned about the possibility of being taken to court and what the process entails.

If you’re wondering whether you can be taken to court for debt in Scotland, the simple answer is yes. If you have debts you cannot pay, there will usually come a point when the party you owe money to (your creditor) feels they have no choice but to take legal action to recover the outstanding sum.

If they do, it pays to know how the Scottish debt recovery system works, the potential consequences of court action and the debt management solutions available to you so you can make informed decisions.  

When will a creditor take court action for a debt in Scotland?

Creditors usually turn to the courts only as a last resort. Before taking legal action, they must make reasonable efforts to recover the debt, which often includes sending reminders, issuing formal payment demands and giving you the chance to set up a repayment plan. 

You’re most at risk of court proceedings if you don’t respond to emails, calls or attempts to negotiate with the creditor. If a creditor believes you are unable or unwilling to pay, they will usually consider court action. How quickly they reach that point will vary depending on the type of debt, its size and how long it has been outstanding.

• Who is taking action
• How much you owe
• The deadline to respond

Once you receive a warrant, you have 14 days to respond by: 

• Paying the debt in full
• Disputing the debt
• Admitting the debt but asking for more time to pay

If you ignore the warrant, fail to provide sufficient evidence to dispute the debt or make a request for extra time to pay that is refused, the court can issue a Decree against you. Once a Decree is granted, the creditor can take enforcement action, known as diligence in Scotland, to recover the debt. Possible diligence measures include:

• Bank arrestment - Recovering the debt from your bank account
• Earnings arrestment - Deducting pay from your wages to repay the debt
• Attachment of assets - Seizing and selling possessions to recover the outstanding amount
• Inhibition - Preventing the sale or transfer of property until the debt is paid

If the creditor is still unable to recover the debt, they can ask the court to place you into Sequestration (bankruptcy in Scotland) or, if it’s a business debt, force your company into Compulsory Liquidation.

How to avoid being taken to court for debt in Scotland

If you have unmanageable debts and are being threatened with legal action, there are debt management solutions that can help you manage repayments, protect your finances and avoid court action. The options for individuals include:

• Time to Pay Orders - Legal arrangements granted by the court that allow you to repay a debt in affordable instalments rather than all at once.
• Debt Arrangement Scheme (DAS) - A government-backed debt repayment programme that freezes debt interest and charges, protects you from enforcement action and allows you to pay what you owe through affordable instalments.
• Trust Deed - Trust Deeds and Protected Trust Deeds are formal debt solutions designed for individuals who cannot pay their debts in full. They allow you to make affordable monthly payments towards your debts, usually over four years.
• Sequestration (bankruptcy) - If your debts are very high compared to your income, Sequestration might be your only option. It provides debt relief and brings an end to court action and diligence. However, your assets will be at risk.  

There are also debt solutions for Scottish businesses that can prevent creditor legal action. They include informal payment plans with creditors, formal debt repayment agreements, known as Company Voluntary Arrangements (CVA), and Company Administration, which can be an effective way to restructure debt or achieve a sale.  

If your business can no longer pay its debts and isn’t financially viable, you can choose to close it through a formal process called a Creditors’ Voluntary Liquidation (CVL). An Insolvency Practitioner will sell the company’s assets to repay the creditors as far as possible, and any remaining unpaid debts are usually written off and do not pass to you personally.

Are you being threatened with court action for a debt in Scotland?

If you’re worried about being taken to court over a debt you can’t afford to pay, please get in touch with our team of licensed Insolvency Practitioners. We’ll explain your options clearly, help stop interest and charges, and work with you to find a solution that reduces your repayments to a manageable level.