Newham

Stage 6 - How do I deal with non-priority debts?

Find out what to do if you have money left for non-priority debts.

Contact your non-priority creditors

If you are working your way through the stages of our debt advice pack you will have listed any non-priority debts into the blank financial statement document at Stage 4 and worked out how much you owe. Also on this page there are examples of letters you could send.
If you have missed this step, visit Stage 4: How do I draw up a financial statement? and complete box F on the blank financial statement document.
Next, contact each of your non-priority creditors by phone, email or post. Whichever way you use, send each a copy of your completed financial statement, together with a covering letter that briefly explains why you have financial difficulties and what you are asking the creditor to do.
 
 

What if a debt is with a collection agency?

Contact the agency instead of the creditor, but do not treat the debt any differently. Debt collection agencies have no more powers than creditors and, like creditors, cannot send bailiffs to call unless they have a County Court Judgment and Warrant from the county court.
 
 

What if a debt is with my bank?

If you have an overdraft or other debt with the bank into which your income is paid, be careful. The bank can take money out of your account to pay money you owe them. If the bank does not agree to your offer or other request, arrange for your income to be paid in to an account elsewhere.
Get information on basic bank accounts
You may decide to arrange for your income to be paid into an account elsewhere before you contact your bank, just in case.
 
 

Could I get help to pay my water bill?

If you are struggling to pay a Thames Water bill and are in financial hardship, the Thames Water Customer Assistance Fund may be able to help. Any grant is usually a one-off payment only; the Fund does not provide a constant discount off bills. To get more information or an application form, call 0845 456 6863 or use the link below.
Get more information on the Thames Water Customer Assistance Fund
 
 

What if I have a mortgage shortfall after my home is repossessed?

In some situations where you have had your home repossessed, you may later be told you still owe money. This happens when the amount your home was sold for was not enough to pay the outstanding mortgage and any secured loans. The money you still owe is called a ‘mortgage shortfall’. It is a non-priority debt but can be for a large amount. 
Get more information on how to deal with a mortgage shortfall
 
 

If you have money for non-priority debts

Before making offers to non-priority creditors, deal with any priority debts, as described in Stage 5 - How do I deal with priority debts?
 

How much should I offer each?

One way to work this out is to divide the money on a pro rata basis. So that, the larger the debt, the larger the monthly offer of repayment. This way is commonly used in debt advice and by courts.  To work out pro rata offers, for each debt in turn:
  1. Divide the amount owed on that debt by the total owed on all your non-priority debts.
  2. Multiply the answer by the amount of money you have left each month for non-priority debts.
  3. This gives you the monthly offer for that debt.
Example: Joe and Paula have £30 a month to pay the following debts:
  • Credit card - £1,600
  • Bank loan - £650
  • Phone - £450
Total owed: £2,700

Their offers for monthly payments are:
  • Credit card - £1,600/£2,700 X £30 = £17.78 a month
  • Bank loan - £650/£2,700 X £30 = £7.22 a month
  • Phone - £450/£2,700 X £30 = £5 a month    
Enter each offer alongside the relevant debt on your financial statement. You can check your calculation, by adding up your offers to non-priority debts. The total should be the same as the monthly amount you have in “Box E Money for credit debts” of your financial statement.
 

What if my offer is less than the interest?

If your offer is less than the monthly interest being charged on a debt, ask the creditor to freeze interest and charges.
 

What do I say in my letter?

 

When should I start paying?

As soon as you can, do not wait for the creditor to accept your offer.  Some creditors wait for payments to start before they will agree to an offer.
 
 

If you do not have money for non-priority debts

This may be because your income is very low or because any money left after expenses is going to priority debts. What you ask the creditors to agree depends on your circumstances. If you later start work or clear a priority debt, you may then have (more) money for non-priority debts. 
 
I can afford token payments now and maybe more later. You could ask each creditor to accept, say, £1 or £2 a month for the time being, freeze interest and review the situation in, say, six months. Enter your token offer alongside each non-priority debt on your financial statement.
See a sample letter that asks a non-priority creditor to accept token payments for the time being (Word). Amend and send to each creditor with your financial statement.
 
I cannot afford even token payments now, but may be able to afford to pay later. You could ask each creditor to suspend payments for the time being, freeze interest and review the situation in, say, six months.  Enter “Nil” alongside each non-priority debt on your financial statement.
See a sample letter that asks a non-priority creditor to suspend payments for the time being (Word). Amend and send to each creditor with your financial statement. If you are working, creditors will probably expect you to pay something. Check again to see whether you could afford token payments.
 
I will never be able to afford repayments. If you are never likely to work, because for example you are ill or disabled, creditors may agree to write off the debts. Enter “Nil” alongside each non-priority debt on your financial statement.
See a sample letter that asks a non-priority creditor to write off your debt (Word). Amend and send to each creditor with your financial statement and medical evidence. If you own your own home, get advice before asking for debts to be written off as creditors may try to secure them against your home.
 
 

What if a creditor says no?

Write again, asking them to reconsider. Mention any creditors who have agreed. If you made offers, continue to pay the offer. If the creditor is refusing to freeze interest, point out that your offer is based on their freezing interest, otherwise the debt will not reduce. If a creditor persists in saying no, remember:
  • to pursue the debt through the county court they must first get a county court judgment, when you will get your chance to put your offer in writing to the court
  • you worked out your financial statement to offer your creditors as much as you can reasonably afford. If you now pay one creditor more than your offer, you will not have enough for expenses and other creditors.
 
 

Reviews

Non-priority creditors are likely to want to review your situation after three or six months. They may write, asking for a review or asking that you pay the whole amount immediately. 

Either way, send them an updated financial statement. If you have more money available because, for example, you have started work or cleared a priority debt, you do not have to offer it all to non-priority debts. You may need more money for expenses or to increase payments to a priority debt. 
 
 

County Court Judgments

If a creditor starts action to get a county court judgment, there is rarely a court hearing; it is done through the post or online. You will get a claim form from the court, together with a 'Notes for defendant' form and response pack. Read through the first two and the instructions in the response pack.
 
You can:
  • use the admission form in the pack to make an offer to pay monthly
  • use the defence and counterclaim form in the pack if you disagree with any part of the claim or are claiming money from the creditor
  • use the acknowledgment of service form in the pack if you need extra time to reply

Since 1 October 2012, if you own your home, a creditor has been able to ask for a charging order at the same time as a County Court Judgment. A charging order secures the debt against your home.

Get more information on charging orders.

How do I complete an admission form?

Read the instructions on the form, it is similar to a financial statement and you can offer to pay a set amount each month. Make sure you return the form before the given deadline. If your income is very low you could make a token offer of, say, £1 or £2 a month. It is a good idea to enclose a copy of your financial statement when you send the completed form to your creditor. Send the form by recorded delivery and keep a copy. Start paying your offer as soon as possible.
See an example of a completed admission form (PDF).
 
 

What happens next?

Your creditor or their solicitors send the admission form to the court, saying whether they accept your offer. The court issues a County Court Judgment, ordering you to pay your offer if the creditor has accepted this or ordering you to pay an amount decided by the court if the creditor has not accepted.
As long as you pay the amount ordered, the creditor cannot take any further action. The County Court judgment stays on your record at credit reference agencies for six years.
 

Who pays the creditor’s legal fees?

These are included in the amount they claim on the claim form. Further costs might be added only in the unlikely event of a court hearing or if the creditor takes further action because you do not pay the amount ordered.
 

What if I cannot afford to pay as ordered?

Get an application for suspension of a warrant and/or variation of an order - Form N245 online or from a court.

Fill in the form (the second page is similar to a financial statement) ticking the space to say you can pay by monthly instalments and entering your offer. If your income is very low you could make a token offer of, say, £1 or £2 a month. It is a good idea to enclose a copy of your financial statement when you send the completed form to the court.  You will usually have to send the form to the Court that made the order.  But telephone the court first, just to check that the case has not been transferred to another court. Start paying your offer as soon as possible. See an example of a completed N245 form (PDF).
 
Get contact details for courts. 
 

What happens if I do not pay?

The creditor can ask the court to issue:
  • A warrant of execution allowing the county court bailiffs to visit. The bailiffs do not have the right to enter your home unless someone invites them in or they have been in before.

Get Form N245 online or from a court. Fill in the form, ticking the boxes asking for the warrant to be suspended and (if you wish to pay less each month than ordered) a reduction in the instalment order.  If you are asking for a reduction, it is a good idea to enclose a copy of your financial statement when you send the completed form to the court. Return the form to the court that issued the warrant.

Get contact details for courts
  • A charging order that secures the debt against your home. If your creditor asked the court for a County Court Judgment against you before 1 October 2012, they could get a charging order only if you did not pay what the court ordered.  If they ask the court for a County Court Judgment against you on or after 1 October 2012, they can ask for a charging order immediately.  Either way, if a creditor is asking for a charging order on your home, get advice.
  • An attachment to earnings order so that payments can be taken directly from your earnings. Read the information sent by the court, and return your completed form within the time limit.
  • An order to obtain information from judgment debtor so that the court can ask you about your financial circumstances. Attend court at the appointment time given, taking proof of income and a copy of your financial statement.
Get more information on how County Court Judgments are enforced
 If you are sorting out debt problems, start at the beginning of this guidance, otherwise you may miss valuable information.

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