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Tackling your debts

How can a Debt Relief Order help if I've received a CCJ?

Posted 28 August 2013

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Do you know what your options are if you get a CCJ? It’s possible that a debt solution, like a DRO, could help in this situation, so make sure you know how they work.

How can a Debt Relief Order help if I’ve got a County Court Judgement (CCJ)?

If you’ve received a CCJ, you definitely need to put a plan in place to start dealing with your debts. Even at this stage it’s not too late to find a way to get out of debt, all you need is the right solution for you.

It is possible to get a CCJ for a relatively small amount of debt and if this happened a DRO might not be necessary. In this blog we’re going to look at what a CCJ is so you understand the situation that you’re in and we’re also going to explain what a DRO is and when it could help you if you’ve found yourself with a CCJ. 

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What’s a CCJ?

A CCJ is an official court order issued in England, Wales or Northern Ireland. You get one when you haven’t repaid debts that you owe and your lenders, after contacting you and explaining that you have arrears, have taken you to court. The court then looks at the situation and decides whether you owe the money, how much you owe and how you need to pay it back.

It’s never a good idea to ignore a CCJ as the consequences can be severe and include:

·         visits from bailiffs

·         extra court and bailiff costs being added onto your existing debt

·         the lender being able to  apply for money to be taken from your wages

·         the lender being able to apply for the debt to be secured against you home

If you haven’t received a CCJ, but you’re fearful that you will, the most important thing you can do is keep your lenders up-to-date with what’s happening and why you can’t pay back the debt as you agreed. It’s even better if you can contact your lenders and tell them that you’ve sought professional advice about your debts and you’re looking into whether a debt solution could help you. To get started on this, click one of the options on the left and speak to one of our advisors.

How you respond when you actually get a CCJ depends on the situation that you’re in. If you can afford to pay something back towards the debt, but not at the expected rate, you should contact your lender and explain what this is, to see whether this is acceptable to them. If you can’t afford to put anything towards the debt then it’s time to look into a debt solution such as a Debt Relief Order (DRO).

Let’s have a look and see how a DRO could help if you’ve already got a CCJ.

What is a DRO and how could it help?

DRO stands for Debt Relief Order and it’s a type of debt solution available to certain people who have debts that they can’t repay. It’s a formal solution designed for people who have a very limited amount of spare income to put towards their debts and who also don’t have assets of very high value.

To be eligible for a DRO you would need to have less than £20,000 in unsecured debts, have assets that amount to less than £1,000, a car worth less than £1,000 and have less than £50 in disposable income every month.

A DRO is a legally binding way to deal with insolvency, which means you officially can’t pay your debts back. A DRO would help by preventing your lender from taking you to court and issuing a CCJ or, if you already have a CCJ, a DRO will stop the lender taking any of the further action listed above, like sending bailiffs round or apply to have money withheld from your wages. Another advantage of this solution is that interest and charges on your debts are suspended so the debt can’t build up while the DRO is ongoing.

Your payments towards your unsecured debts on the DRO – including the ones mentioned in your CCJ - are suspended for a year. If your situation has not improved by the end of the year then the rest of your debts are written off. From then on, those debts should be marked as “satisfied” or “settled” on your credit file.

Entering into a DRO will have a negative effect on your credit rating. This means that it may be more difficult for you to obtain credit in the future and you may have to borrow at a more expensive rate than if the DRO wasn’t there. However, if you are getting to the stage where a CCJ is being issued, or already have one, there will definitely already be some damage to your credit rating and the DRO could still be beneficial to you all things considered.

It’s very important that you keep to the terms of your DRO. If it comes to light that something is amiss then it is possible for the DRO to be revoked, which means that you’d have to start paying something towards your debts again and the interest and charges would be added back on. However, if you were eligible for a DRO and you kept to the agreement, there’s no reason why starting one of these plans wouldn’t help you if you had a CCJ and other unmanageable, unsecured debts.

Remember, a DRO isn’t the only debt solution that could help if have unmanageable debts, you should reach out to experts for help and advice so you can find the best one. If you’d like to speak to someone about your options, just use the options to the left. 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.