Personal Debt – What action can your creditors take against you?

If you’re struggling to repay personal debt, it’s important that you know the steps that creditors can take to recover their money. It will help you prepare for the inevitable threatening letters, and more serious enforcement measures a creditor might take.

Enforcement action in Scotland is known as ‘diligence.’ One of the main aspects of enforcement is that the creditor must obtain the correct authority to undertake these actions, and this is generally provided by the courts in the form of summary warrants and court orders.

But what is the first communication from your creditor likely to be?

Default Notice

After three or more missed payments, a default notice will be sent if the debt is regulated by the Consumer Credit Act (CCA). This tells you how much you need to pay, the payment deadline (you must be given a minimum of 14 days to pay under CCA rules), and what will happen if you don’t make the payment.

Initial Writ and Decree

Civil proceedings in the sheriff court are generally started by way of a ‘simple procedure notice of claim’ (debts up to £5,000), or an initial writ (debts over £5,000). If you inform the court that you owe the debt but don’t make a payment, the court will issue a decree, similar to a County Court Judgement (CCJ) in England, Wales, and Northern Ireland, which remains on your credit file for six years.

21-day Statutory Demand

These are generally used by creditors who are owed larger amounts of money, and may be sent if they intend to make you bankrupt (known as sequestration in Scotland).

Summary Warrant and fast track procedures

Creditors are able to recover some types of debt using a fast track procedure that begins with a summary warrant. This method is commonly used by HMRC and local authorities for debts including National Insurance, income tax, council tax, and road tax. For council tax debts, you should be offered more time to pay.

Charge to Pay and Charge for Payment

You are given 14 days in which to pay the debt, either via a charge to pay which is generally used for debts up to £5,000, or a charge for payment for debts over £5,000. If you don’t pay, your creditor can take further enforcement action using the following measures, as long as they have also sent you a Debt Information and Advice Package (DAIP).

Diligence measures

These might include one or more of the following:

• Arrestment of earnings

Your employer is ordered by the court to deduct a proportion of your income to repay the debt over a period of time. There are strict regulations regarding how much money can be arrested in this way, and for dealing with a situation where more than one creditor has been granted an arrestment of earnings order.

Another factor to bear in mind with an arrestment of earnings is that your employment status may be in jeopardy. Some industries, including financial and legal, do not allow their employees to be in debt – a clause that should be incorporated into the terms and conditions of your employment contract.

• Bank arrestment

Bank arrestment involves freezing a proportion of money in your bank account with a view to repaying your debt. The amount frozen is strictly regulated by law, and you must retain access to a certain amount – currently £494.01.

This amount covers all your bank accounts if they are held with the same bank, but if you have accounts at different banks, you can retain free use of £494.01 in each account. Bear in mind, however, that it isn’t always obvious which banks are part of a wider banking group.

• Inhibition Order

Your creditor may apply to the courts for an Inhibition Order. This protects the value of your home, so that if you sell it, the creditor receives payment of their debt from the proceeds. Creditors have no rights to force a sale, however, and an Inhibition Order can remain in place for up to five years.

• Attachment Order and Exceptional Attachment Order

Only non-essential items outside your home can be seized using an attachment order. Sheriff officers are usually involved at this point, and can seize certain items for sale to repay some or all of your debt.

An exceptional attachment order allows the seizure of some non-essential items from inside your home, but this is often a measure of last resort for a creditor.

If you’re worried about enforcement action being taken against you, our experts at Scotland Debt Solutions can help. We operate from five offices around Scotland, and can arrange a confidential meeting free-of-charge.