Notice of defaults: everything you need to know
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Don’t worry that you’ll be sent to ‘debtors’ prison’ – this can’t happen for the majority of debts.
Falling behind with your unsecured debt repayments can be a troubling time, especially if you don’t know what the consequences could be. Could your creditors repossess your house, for example? Or could you even go to prison if you don’t pay what you owe?
Don’t worry – you won’t be sent to prison for the vast majority of debts in the UK. This can only happen with a few specific debts, and it will only happen in very specific circumstances – it’s really not at all likely. Let’s take a look at what could happen if you don’t pay your debts.
For non-priority debts – you CAN’T be imprisoned
Most unsecured debts are non-priority debts. That doesn’t mean you shouldn’t consider them important, of course, but repaying them has to come after your priority bills. Your priority bills and debts are those that will have a serious consequence if you don’t pay them. For example, you need to make sure you can afford your rent or mortgage to avoid losing the roof over your head, and you need to pay for food for your family.
Non-priority debts include credit cards, personal loans, store cards, overdrafts, catalogue debts and utility arrears. It’s not a criminal offence if you don’t pay these, so if you fall behind with the repayments, you’ll never be imprisoned.
What can happen instead?
But just because you won’t get a prison sentence if you don’t keep up with your repayments, it doesn’t mean you shouldn’t pay them. Your creditors can still take serious further action against you if you don’t pay what you owe – but this kind of action should only ever be a last resort.
If you’ve missed a few payments and you’re not responding to your creditor’s letters and calls, they can default your account. This happens when you’re no longer keeping to the terms of your original credit agreement so the creditor has effectively cancelled it, and they can now take further action.
They can then apply for a CCJ (County Court Judgement) against you, and this will appear on your credit history for at least six years. This can make it harder to get credit in the future or, if lenders do accept you, it might be at a higher rate of interest. You could also struggle to get some other services like a rental agreement or a mobile phone contract as you’ll have a credit check for these.
Your creditors can pass your debt to a debt collection company, who will then attempt to get the money back from you. They might come round to your house to do this but it’s important to remember that they’re not allowed to threaten you, force entry into your home or take your possessions away. They should never harass you or tell you that you’ll go to prison if you don’t pay – you should complain to your creditor if this happens.
But if the debt collector fails to get you to pay anything, your creditor might apply to the court to get a bailiff to do this instead or a High Court Enforcement Officer (HCEO), who have additional powers. Unlike debt collectors, bailiffs can come into your home and take your belongings to cover the cost of your debts. You’ll have warning when they’re coming round to do this though, so don’t worry they’ll just come over unannounced. Find out more about their powers in our blog on debt collectors, bailiffs and HCEOs.
When you can go to prison
There are a few priority debts that it’s a criminal offence not to pay. These are criminal fines, CSA child maintenance arrears, council tax arrears and your business rates tax bill if you own a company.
If you don’t pay these debts, there is a possibility you’ll go to prison. However, it’s important to keep in mind that this will only ever happen as a last resort. You’ll need to ignore your creditors’ attempts to contact you for a long period of time or refuse to pay what you owe. You won’t go to prison if you miss one council tax bill for example, and if you genuinely can’t afford to pay it.
What to do
Keep in mind that any serious further action will never be the first thing your creditors do if you don’t pay a debt. They’ll only look to do this if they’ve exhausted any other possible ways of getting back the money you owe.
That’s why it’s really important to open any late payment letters you get from your creditors or answer the phone when they call you. This can be intimidating – especially if you can’t afford the debt – but if you keep in touch with your creditor and let them know your situation, they’re less likely to take further action against you. Even if you can’t afford to repay the debt in full, you can speak to your lender and ask to set up a repayment plan, based on what you can afford.
Don’t worry if you don’t think you can face speaking to your creditors yourself. You can speak to a debt advisor to get advice about how to deal with your debts. They’ll be able to tell you about the different debt solutions available and what the best option is for your situation. Even If some of your debts, like Child Maintenance can’t be added onto a debt solution, there would still be an allowance made in your income and expenditure so that you can afford to pay them. You can get in touch with our debt advisors using any of the options to the bottom of the page.
by Emily BancroftBack to blog home