What can creditors do if I don't pay?
Creditors of priority debts have different powers of recovery depending on the debt. Many will need a court hearing before taking action. It is very important that you speak to a debt adviser if you have any priority debts.
It is very important that you speak to a debt adviser if you have any priority debts.
Once you miss a payment to a debt, the creditor should contact you and tell you that you are in arrears. If you cannot make an arrangement to clear the arrears they may pass the debt to a debt collection agency or apply for a Decree.
Debt Collection Agencies (DCA)
A DCA has no more power than the original creditor. They are not bailiffs and cannot come into your home or take anything from you. A DCA works on behalf of the original creditor. If you feel they are acting inappropriately you should complain to the DCA and the creditor.
If a DCA contacts you, you should deal with them in the same way as the original creditor. Send them a copy of your completed budget sheet along with a letter explaining the situation and making an offer of payment (if you can afford one). If possible you should communicate with them in writing only and keep a record of all correspondence.
Court Action
If you are in debt and you cannot pay what you owe, your creditor may take court action against you. This will be civil court action, which means that you cannot go to prison for owing the debt.
There may be no dispute over the amount owed to your creditor. However, if you do dispute the debt and think that you have a defence, do not ignore the court document. Get advice immediately from a legal aid solicitor, law centre or Citizens Advice Bureau.
In Scotland, the person or company taking court action is called the ‘pursuer' or ‘claimant'. The person who the action is taken against is called the ‘defender’ or ‘respondent’.
In Scotland, the person or company taking court action is called the ‘pursuer' or ‘claimant'. The person who the action is taken against is called the ‘defender’ or ‘respondent’.
In Scotland, debt actions can be started in the ‘Sheriff Court’ and the ‘Court of Session’. The Court of Session will only usually be used for claims for more than £100,000.
Since 28 November 2016 there are two different Sheriff Court procedures:
- ‘Simple procedure’ for debts up to £5,000.
- ‘Ordinary cause’ for debts over £5,000. Under the simple procedure, although a sheriff presides over the court, it is less formal than ordinary cause. The court may still seem an intimidating place at first, but you should be given help by staff of the sheriff clerk’s office on procedures and how to use the court.
You will first know about an action when court documents are served on you. The documents will normally be sent to you by post.
If a creditor takes court action against you using the ordinary cause procedure, you should receive an ‘initial writ’. The documents used in the ordinary cause procedure are much more formal than sheriff court summonses.
It is very important to reply to court forms within the correct timescales.
If you don’t want to speak for yourself in court, and cannot afford a solicitor or cannot get legal aid, some courts allow non-solicitors to represent you. Others require you to represent yourself or for you to be represented by a solicitor or ‘advocate’.
If you don’t want to speak for yourself in court, and cannot afford a solicitor or cannot get legal aid, some courts allow non-solicitors to represent you.
Advice and assistance through the legal aid system may be available to you for initial advice from a solicitor, who can help by advising on court procedures. There are detailed rules about who is eligible.
Legal aid is not available for small claim actions. You may be able to get advice from a solicitor about the preparation of your case under the ‘Advice and Assistance Scheme’. You have to meet certain criteria to be able to get help under this scheme. The solicitor will not be paid under this scheme for going to court with you.
If you have admitted the debt and applied for time to pay, the creditor may accept or reject the offer. If your offer is accepted, start making payments immediately. If you have problems with the arrangement, you may be able to ask to reduce the payments.
If you have defended the case under the simple procedure, the sheriff will first consider the case in private. The sheriff can then choose to do any of the following:
- Refer you and the claimant to alternative dispute resolution,
- Arrange a case management discussion,
- Arrange a hearing,
- If the sheriff thinks they can decide the case without having a hearing, tell you that they are considering doing this,
- Dismiss the claim if it is obvious is cannot succeed, or
- Grant a decree against you if it is obvious that your defence cannot succeed.
- If you defend a case and are unsuccessful, you will usually have to pay the legal costs of the creditor.
- If you do not defend the action, you will usually have to pay the claimant’s expenses and costs.
- The claimant will also be entitled to interest on the debt. The rate of interest being claimed must be shown on the claim form.
- It may be the rate in the original contract or the ‘judicial’ rate (this is the rate allowed under court rules). The current rate is 8%.
Enforcement
- 'Diligence' is the technical term for debt enforcement in Scottish law,
- Under the simple procedure creditors have to wait for 4 weeks after the decree is granted before using enforcement against you,
- In ordinary cause cases the sheriff may grant an open decree, allowing them to use diligence straight-away. If you had been given time to pay but miss a payment, your creditor could also then apply to use diligence.
However, for most types of diligence, the creditor must serve a ‘charge for payment’ before diligence can begin. This is a legal document and will have ‘charge for payment’ written across the top.
A creditor can only take further diligence once the Charge for Payment has expired.
Diligence may include:
- Freezing money in your bank account;
- Taking money directly from your earnings;
- An attachment of property outside your home;
- An application for an attachment for property inside your home; or
- An inhibition on the sale of property such as your house.
The amount that can be taken from your earnings will depend on the order in place but generally will be deducted from your “take-home pay”. This is the amount which is left once income tax, national insurance contributions and pensions have been deducted.
From April 6th 2019, if your take home pay is less than £122.28 per week or £529.90 per month, your creditor cannot take any money from your wages.
This is known as the “Protected Minimum Balance”. Further forms of income or earnings cannot be taken including monies from benefit, redundancy pay or tax credits.
This is the same for bank arrestment orders where a creditor applies for your bank or building society account to be frozen in order for money to paid directly to them.
However, this is only for balances which are over the Protected Minimum Balance. From 6th April 2019, this amount will be £520.90. This is the minimum amount which you can access when your account is frozen.
If you are facing any form of court action or your creditors have served a Charge for Payment, you may want to seek further advice. Further information can be found under our section called Get help from a Specialist Adviser.
