Legal advice surrounding debt

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Health Assured team

29 December 2021

Facing financial difficulty is extremely tough and this can sometimes lead to stress. Luckily, there are many support services available for individuals in this situation and it is therefore important to address any financial concerns in a timely manner and seek support as soon as possible.

To understand your financial situation, it is a good idea to first create a list of your current incomings and outgoings as this will show you immediately if there is a shortfall. Once you have listed all your outgoings, sort them into three categories, essentials such as utility bills, non-essentials such as streaming services and debts. The debts should be listed in order of priority with the most important being anything that needs to take precedence over others, for instance, those that could leave you homeless, or potentially in prison. An example of these priority debts would be your mortgage payments or council tax bills. Priority debts vary between England, Wales, Scotland, Northern Ireland and the Republic of Ireland, so always make sure to check based on your jurisdiction

If you do find yourself slipping into arrears on your bills, it is best to act straight away to get the best resolution possible. There are multiple ways to do this, and the best way will depend on your financial situation and what your creditors are willing to offer.

Create a budget plan

It can be beneficial to list all the gathered information into a budget plan as this will help you understand what payments you can afford to make and where you are going to struggle that month. You can create the budget planner yourself but there are also free budget plan templates online that you can use to create this. Step Change are a debt charity offering free advice and support to those struggling with their financial situation. They have a budget planner available to download on their website. 

Using your budget plan

Once you have created a budget, you will be able to understand your current costs and where you can make any potential changes to your spending habits. Your budget should help you strike a balance between paying for your essentials, towards your debts and to have some things to enjoy still. This will also give you an opportunity to be proactive and speak to any relevant organisation to see how they can help you. Creditors may be able to accept a lower payment from you over a temporary period, offer you a payment holiday or even agree to a settlement of the debt.

What happens if debt is ignored?

Avoiding managing your current financial situation and ignoring creditors can lead to an escalation through the courts in which creditors will seek to implement a County Court Judgement (CCJ) against an individual. A CCJ is a way for creditors to legally enforce a debt by asking the court to issue a judgement stating that the individual must pay the creditor. If you receive a court notification, it is important that you respond within the specified timeframe, otherwise there will be a default judgment made against you.

Once a CCJ is awarded you have the chance to remove it from your record if you pay the debt off in full within 30 days. This would be done via a ‘certificate of cancellation’ from the County Court, and you can apply for this using court form N443.  There is a £15 fee to apply for this, but you may be exempt if you are on a low income.

However, if the CCJ is not paid within 30 days, it will remain on the individuals credit file for 6 years and creditors can seek to enforce the debt. Courts can order for bailiffs, an attachment of earnings order (deduction from your wages) or sometimes put a charge on your property to collect the debt.

If the CCJ is paid after the 30 days has passed it would remain on the credit file for 6 years but will show as paid off or ‘satisfied’. This means that it would still show up on your credit file but anyone who checks the register would know that you had paid it off.

The processes for enforcing debts and collecting payment can vary between jurisdictions. If you would like further guidance on this, our legal team are here to help.

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