Frequently asked questions

On this page you will find answers to questions that may come up when dealing with your debts. The questions have been grouped into different headings to help you find what that you are looking for more quickly. The answers to the questions on this page contain links to more detailed information to help you.

Credit and credit files

How can I find out which banks are connected?

If you cannot afford to pay your creditors in full and you are considering your options to deal with them, it is very important to get your income paid into an account which is separate from all your debts. Some banks are connected, so it is important to open an account which is not connected in any way to any of the creditors you owe money to.

My bank keeps taking money from my account to pay my debts to them - what should I do?

If you owe money to your bank, for example for a credit card, loan or overdraft, in some circumstances your bank is allowed to take money from your account to make repayments on these debts. It is called the 'right of set-off'. To make sure your income or savings are protected, open a basic account with a different bank as soon as possible, and arrange to have your wages, benefits or other income paid into this account. If the bank has already taken money from your account, you may be able to ask them to refund it as they should leave you with enough to live on.

Is there a credit black list?

No, there is no such thing as a credit black list. Each lender takes into account different information when deciding whether to lend, so being turned down by one doesn't mean you will be turned down by all. The credit reference agencies cannot offer an opinion to lenders on your 'creditworthiness' - they only pass on factual information about your borrowing history. For more information see our fact sheet: credit referencing.

How can I improve my credit rating?

Make sure your credit file is up to date by making sure you are on the electoral register. You can apply to go on the electoral register at any time of the year by contacting your local council. Lenders often use credit scoring to consider whether to give you credit. Each time you apply for credit a search by the lender is recorded on your credit file. Too many searches could reduce your credit score. Getting copies of your credit file regularly means you should be able to quickly spot any information that is incorrect. You can ask for incorrect information to be removed or corrected by contacting the credit reference agency.

Can I get a consolidation loan to deal with my debts?

National Debtline cannot give financial advice. However, we can suggest some helpful things for you to think about before taking out further credit to deal with existing debts. If you take out more credit, such as a consolidation loan, you risk getting deeper into debt in the long run. It is important to complete a budget sheet. This will help you to see the money you have coming in and going out. Contact us for help, information and advice. We can explain to you the advantages and disadvantages of taking out further credit, as well as the alternative options. This will help you to make the right decision.

If a debt is owed jointly by more than one person, does the creditor have to agree to split the debt between them equally?

Unless stated otherwise in the agreement, each debtor is 'jointly and severally liable'. This means that the creditor can pursue each person for the whole debt. Once the debt is paid, the creditor should stop asking for money. If one person has paid more of the debt than the other, they could pursue the other person for the extra amount. However, this is likely to require legal advice.

Someone I live with has debts. Will this affect me?

Usually, a creditor can only ask you to pay a debt if you signed the original agreement with someone else, or if you signed to say you would be a guarantor for them. Being a guarantor means that you agree to pay the debt if the person named on the agreement falls behind with payments. Debts are not 'registered' against a particular address. Instead, they are linked to the person who owes the money and anyone that they have a joint financial connection with. This means that if you live with someone who has debts, but you have no financial connections with them such as joint bank accounts or joint loans, your credit reference file should not be affected. You can request a copy of your credit reference file to see what information it contains.

Will I be able to open a new bank account if I have got debts?

Yes - most banks and building societies offer what is called a 'basic bank account'. These accounts are useful because your credit score does not usually matter. This means you should still be able to get a basic bank account even if you have lots of debt or a decree, and in some cases, if you are bankrupt. A basic bank account is a simple type of account that lets you pay money in and out, but doesn't usually offer things like an overdraft or a cheque book.

Dealing with creditors

Can I have a bank account if I go bankrupt?

Many banks have their own rules about who can have the different types of accounts they offer. Some do not allow someone who is bankrupt to have an account with them, even 'basic' accounts that do not offer any credit. However, there are certain accounts that you can open, even if you are bankrupt.

If I go bankrupt, will I lose my home?

When you go bankrupt, any valuable property that you own (your assets) may be sold to raise money to pay your creditors. If you own your home, and the property is worth more than the amount of any outstanding mortgage and secured loans, your home has 'equity' in it. Depending upon the amount of equity, it is possible that your home may be sold. This is usually a last resort. There is normally an opportunity for you to negotiate an alternative, such as a third party buying out your share. If you rent your home, your tenancy could be affected if you go bankrupt. Check your tenancy agreement and your landlord's policy. If you are a reliable tenant and pay your rent on time, your landlord may not take action to end your tenancy, even if there is a clause in it which allows them to do this.

If I go bankrupt, will my job be affected?

Some types of job may be affected by bankruptcy. Always check your contract of employment to see if bankruptcy is mentioned. You can also ask your staff welfare officer or trade union if you are uncertain. If you belong to a professional body which does not allow you to be bankrupt, you could be struck off. For example, this may affect solicitors and accountants.

I am receiving debt collection letters addressed to someone else for a debt I do not owe. What should I do?

If debt collection letters are sent to your address in someone else's name, this does not make you liable for the debt. Also, the debts should not affect your credit reference file as long as you do not have any joint financial connections (such as joint bank accounts or joint loans) with the person named on the envelope. You can return this type of letter to the sender with a note on the envelope stating 'addressee not known'. If you have previously lived with the person named on the envelope and the letter relates to essential household bills such as council tax, gas or electricity, the rules are more complicated. Contact us for advice.

I have already repaid the amount I borrowed. Why do I still owe money on my debt?

When you take out a credit agreement, the total amount you owe to the lender includes the money that you originally borrowed and interest and charges that the lender adds on for borrowing the money. There are different ways to get information about what you still owe. One simple way is to write to the creditor and ask for a full breakdown. Different pieces of law give you rights to get information about what you owe. You can use these if your creditor does not give you the information you want.

Can National Debtline contact my creditors for me?

National Debtline is a self-help organisation. This means that we can give you information and advice that helps you to choose the best way to deal with your debts. We cannot write letters on your behalf or phone your creditors for you. However, we provide further help and guidance on how you can deal with your creditors, including sample letters for you to use when writing to them. You can call our free phone helpline as many times as you need so we can give you on-going advice. In certain circumstances, we may be able to refer you on to another organisation that can help you set up different types of arrangements to deal with your debts.

Can a sheriff officer force entry to my premises?

When a creditor takes action against you through the sheriff court, there are different types of enforcement (known as diligence) that they may use. Sheriff officers are individuals who are employed to help with the diligence process. For most types of diligence, a sheriff officer has no right to force entry to your home. However, there are some cases where a sheriff officer can force entry to garages, outhouses or business premises. For a sheriff officer to be given the right to force entry to your home, the creditor must apply to the sheriff court to get their permission. There are set procedures that the creditor should follow and the sheriff will not always grant the creditor's application. Before your situation gets to that stage, there are a range of options that may be available to deal with your debts.

I haven't got a written agreement and didn't sign anything - am I still liable for the debt?

The rules that should be followed and the paperwork you are entitled to depend upon the type of agreement you took out. For example, if you took out the agreement over the internet, the creditor may be allowed to send you certain documents by email. For bank overdrafts, you may not have a separate written agreement, although information about your overdraft should be explained in the terms and conditions of your bank account. For other debts such as loans, credit cards and store cards, there should be a written agreement that meets the requirements laid down in the law. If the creditor did not follow the correct procedures when you took the agreement out, you may have a defence to any court action they take to get their money back. Contact us for advice.

I have been contacted by a company saying that they can get my debts written off. What should I do?

There are lots of companies who say they can get your debts written off for you by claiming that your agreements have not been drawn up properly. Be careful. It is not easy to challenge a credit agreement and many are drawn up correctly. Many of these firms charge large up-front fees and you may not be able to get your money back if they are unsuccessful. If you are worried about your debts and struggling to repay them, using one of these companies is unlikely to be your best option. Get free and independent advice from us first. We can tell you if there may be genuine grounds to challenge your agreements and also give you advice on all your options to deal with your debts.

What can I do if I have a complaint about my debt-management plan (DMP) provider?

The Financial Conduct Authority has produced rules and guidelines that all debt-management plan (DMP) providers should follow. You can refer to these when you make your complaint. As a first step, send your complaint in writing to your DMP provider. If you are not happy with their response, you could check whether they belong to the Debt Managers Standards Association (DEMSA). This is a trade association for certain DMP providers. It has a code of conduct and a complaints procedure. Alternatively, you could complain to the Financial Ombudsman Service. Some debt management companies follow the Debt Management Plan Protocol. This is a set of guidelines that say how DMPs should be set up and run. This may help you with your complaint.

Can my energy supplier disconnect me?

If you don't pay your energy bill, your supplier should only disconnect you as a last resort. They must give you notice first. They cannot cut off your supply unless they have first offered you a range of payment methods to help you pay. It is important to contact them as soon as you know you are going to have problems paying your bill. Treat gas and electricity arrears as priority debts. We have further guidance on how to complete a budget summary to help you negotiate with your energy supplier and try to avoid being disconnected. There may also be a charitable trust fund that can give you extra help.

What is a full and final settlement offer?

When you ask the creditors to let you pay a lump-sum instead of the full balance you owe on the debt, it is known as a 'full and final settlement offer'. In return for having a lump-sum payment, the creditor agrees to write off the rest of the debt.

How should I negotiate a full and final settlement offer with my creditor?

Ask your creditor to accept a full and final settlement offer in writing, not over the phone. Keep copies of any letters that you send to them. We have a sample letter that may help you. If your creditor refuses the offer, you can ask them to reconsider. There are important things to ask for when you make a full and final settlement offer.

How can I complain about my creditor under a hire-purchase agreement?

You can complain to the Financial Ombudsman Service about how a lender or debt collection agency has behaved when dealing with your account. You will have to follow the lender’s complaints procedure first. Your lender or the debt collection agency may also be a member of a trade association. The trade association may have a code of practice and a complaints procedure.

How should I contact my creditors?

It is usually best to contact your creditors in writing. It is a good idea to keep a copy of any letters you send to your creditors and to get a certificate of posting from the post office. If your creditors contact you by phone, explain that you are taking advice from National Debtline and will only be communicating with them in writing. If your creditors do not respect your wishes, consider making a complaint. We have sample letters that can help you.

What should I do if a creditor rejects my offer of payment?

Look at how you have made your offer. We can advise you on how to negotiate effectively with your creditors using a budget summary of income and outgoings. This gives you the best chance of your offers being accepted. Also, start making the payments that you have offered straight away. Stick to your guns. National Debtline has further sample letters that you can use if your first offer is rejected. Explain that your offer is all that you can afford based on your current circumstances.

My bank keeps taking money from my account to clear a non-priority debt - what should I do?

If you are struggling to pay your non-priority creditors, your bank may use any income that comes into your account to pay towards any debts you have with them. This is known as their 'right of set off'. The Financial Conduct Authority's Banking: Conduct of Business sourcebook (BCOBS) contains guidelines about how creditors should use this right. If they do not follow these guidelines, you could make a complaint. You should also consider opening a new bank account which is separate from all your debts to get your income paid into. Once your income is being paid into this new account, cancel any old direct debits and standing orders on your old account. Only transfer direct debits and standing orders for essential bills to the new account. We have a list of basic bank accounts that do not offer any credit facilities.

If I make an arrangement with my lender, can they still send me a default notice?

The terms and conditions of any agreement you take out should explain your rights and duties. If you do not keep to your duties, for example if you fall behind with payments, your lender can send you a default notice. They can do this even if you make an arrangement to pay the debt back in smaller instalments. The default notice should explain how you have broken the agreement and what you need to do to put it right. Your creditor can also mark your credit reference file to show your payment history. This may make it more difficult to get credit in the future.

When I make a reduced offer of payment to my creditor, do they have to accept it?

No. However, we can provide further information about how to negotiate if your first offer is refused. Also, there are some extra guidelines that describe how creditors should treat you. These guidelines apply to many types of debt that you will deal with, such as bank loans, credit cards and overdrafts.

I disagree with what the council says I owe. What can I do?

The first step is to raise your dispute with the council. Ask them for a breakdown of what you owe, and keep receipts from any payments you have made. If you don't think you should have to pay the bill, provide the council with any evidence you can, for example, proof that you are a full-time student. Depending on why you are disputing the bill, you may need to get advice on your liability or about Council Tax Reduction. Contact us for advice.

My friend or relative is struggling with debts. What can I do to help?

Reassure them that we can give free, independent and confidential advice on the options available to them. We provide a range of self-help materials, including fact sheets and a self-help pack, that back up the advice we give. Our clients can call our helpline as many times as they like for further advice. Where our clients give us permission, we keep fully confidential records of each call so that they do not have to repeat information about their circumstances on each new call. If your friend or relative prefers not to speak to someone at this stage, they may find our online debt advice tool, My Money Steps, helpful. My Money Steps is secure and confidential. If your friend or relative would like to use My Money Steps, they will need to enter some details about their circumstances, including their income and expenditure. My Money Steps can help them to work out a budget and give them personalised advice about what options they might want to consider to help them deal with their debts.

If I do a debt-management plan to deal with my debts, can creditors still add interest to what I owe?

In Scotland, a debt-payment programme under the Debt Arrangement Scheme (DAS) is usually a much better option than a free debt-management plan because, for example, interest and charges automatically stop. You can also include priority and non-priority creditors and you are protected from creditors taking enforcement action. A debt-management plan is an informal arrangement with your creditors where a debt-management company negotiates reduced offers of repayment on your behalf. It is not legally binding. This means that creditors do not have to accept the offers that are made or freeze interest and charges. However, the debt-management company will do their best to get the creditors to agree to freeze interest. In the same way, if you negotiate reduced offers of repayment yourself, your creditors do not have to accept them or freeze interest. However, they may be more likely to do this through a debt management plan as it shows that you have received advice about your situation.

I am interested in a debt-management plan. Can you help?

In Scotland, a debt-payment programme under the Debt Arrangement Scheme (DAS) is usually a much better option than a free debt-management plan because, for example, interest and charges automatically stop. You can also include priority and non-priority creditors and you are protected from creditors taking enforcement action. If you are struggling to pay debts such as loans, credit cards, catalogues and store cards, and you want someone to negotiate reduced repayments on your behalf, a debt management plan may be a suitable option. In certain circumstances, National Debtline can refer you onto a debt management company that will not charge you any fees. For us to refer you, you will usually need to be able to pay each of your non-priority debts at least £5 a month, and be able to repay all of your debts within 10 years.

Should I use my pension to pay my debts?

Since April 2015, if you are 55 or over, you may be able to take money from your pension fund to pay your debts. Creditors shouldn’t pressurise you to do this. Taking money from your pension fund early can have a big effect on your financial future. You may also have to pay tax on some of the money that you take. Your entitlement to benefits could change, both now and in the future. If you are thinking about taking money from your pension, contact us for advice.

Debt types

I am a catalogue agent and my customer hasn't paid - am I still liable?

When you act as an agent for the catalogue company and sell goods, or collect money for the company, you need to be careful. You should create a separate account for each of your customers. If you do not do this, then the catalogue company may hold you responsible for any payments missed by your customers. As long as you set up separate accounts, you (as an agent), should not be held personally liable for your customers’ missed payments.

Is my catalogue agreement the same as a hire purchase agreement?

A catalogue agreement involves buying goods from a catalogue company (the creditor). You own the goods as soon as you buy them. You will then pay the creditor for them on the terms that you have agreed. The goods cannot be taken from you, even if you fall behind with payments. This is different to a hire-purchase (HP) agreement. Under a HP agreement, you do not own the goods until you make the final payment. If you fall behind with payments, the creditor may take action to get the HP goods back from you. For these reasons, a HP agreement is usually treated as a priority debt, whereas a catalogue agreement is normally treated as a non-priority debt.

Is there any extra help I can get with my energy bills?

Some energy companies have set up trust funds that may be able to help you pay your energy bills if you are in financial difficulties. Some trust funds may also help you with other essential household bills if you are struggling to pay them. Each scheme has its own rules about who can apply and how this is done.

Can I get help with making my home more energy efficient?

Making your home more energy efficient means that less of the energy you use is wasted. This should help to keep your bills as low as possible. You might switch to a cheaper tariff or apply for a grant from your local council, depending on the benefits you receive and your age. There may be other types of help you can get, such as grants for home improvements. Contact us for advice.

What are the options for repaying my energy debt?

Your supplier should consider a number of different options for you to repay your energy arrears. These include paying the arrears by instalments, a budget plan, through a pre-payment meter or directly from your benefits.

Can I still be chased for an energy debt on my previous home?

Yes. Whenever you move home, it is a good idea to take final meter readings and give them to your energy supplier. This helps to make sure that your final bill is accurate. If you have the same supplier at your new address, the balance of your account may be carried over to your new account. Any arrears should be treated as a priority debt because if you do not pay them off, your supplier could disconnect your new supply as a last resort. If you have a different supplier at your new address, the bill from your previous home can be treated as a non-priority debt. This is because your current supply cannot be cut off for not paying your old bill.

If I fall behind with my payments on a hire-purchase agreement, can I return the vehicle?

The law gives you the right to end a hire-purchase agreement and return the vehicle. However, this right can be lost in certain circumstances, such as if the creditor has already ended the agreement or the full balance of the agreement has become payable. If you fall behind with payments and your lender sends you a default notice and the time limit stated on it runs out (usually 14 days), the agreement may have already ended. If so, you will not be able to end the agreement and give the vehicle back. If you still have the right to end the agreement, do this in writing.

If I fall behind with my payments on a hire-purchase agreement, can they repossess my vehicle?

When you have missed two payments, your lender should send you an 'arrears notice'. If you don't clear the arrears, you lender may also send you a default notice. Once they have done this, the lender can take steps to get your vehicle back. Your rights depend on how much of the total agreement price you have paid.

How do I know if my agreement is hire purchase?

Under a hire-purchase agreement, you do not own the item until you make the final payment. This is different to a credit-sale agreement, where you own the item straight away and then pay back the money you owe over a certain period of time. If you are not sure whether you agreement is hire purchase, check the paperwork you signed. If it’s a hire-purchase agreement, it should have the words ‘Hire purchase’ near the top of the first page. If you don’t have a copy of the agreement, we have a sample letter that you can use to request one for a small fee.

Will I still owe money if I give my hire-purchase vehicle back and how much will this be?

There can be a difference in the amount you end up owing depending upon how the agreement is ended. If you end your agreement and hand back the goods to the creditor, you should only have to pay up to half of the total amount payable under the agreement, minus sums that you have paid and sums that are due. Where a creditor terminates an agreement and repossesses the hire purchase goods, you will usually have to pay the full amount owed on the original agreement, minus what you have paid and minus the amount the creditor gets back from selling the goods.

What's the difference between hire purchase and conditional sale?

Under a hire-purchase agreement, you have a choice about whether ownership of the item passes to you once the final payment is made. However, under a conditional-sale agreement, the ownership of the item automatically passes to you when you make the final payment.

Can I sell my hire-purchase vehicle?

You cannot sell the goods yourself without the creditor’s written permission. If you sell the goods without permission it can be a criminal offence.

I have bought an electrical item on credit from a shop. Does this mean I have a hire-purchase agreement?

Electrical items bought on credit from shops are usually based on a ‘credit sale’ agreement. This means that you own the item as soon as you take the agreement out, even if you fall behind with payments under the agreement. Hire-purchase agreements are different. Under a hire purchase agreement, you cannot own the item until you make the final payment. If you fall behind with your repayments, your creditor can take steps to repossess the goods. Look at your agreement to check whether it is credit sale or hire purchase.

Sheriff officers

What goods are sheriff officers allowed to take?

After a creditor has taken court action against you, they may use sheriff officers to try to arrange the seizure and sale of some items of your personal property. There are different procedures that can be used to do this. However, sheriff officers should not take certain items, which include goods you reasonably need to carry out your profession, trade or business, up to a total value of £1,000. Certain household items, such as clothing, bedding, basic household furniture a fridge and cooking equipment should also not be taken. A vehicle you reasonably require up to the value of £3,000 is also safe.

How can I complain about a sheriff officer?

You can complain to the Society of Messengers-at-Arms and Sheriff Officers (SMASO) or the 'sheriff principal' about a sheriff officer's behaviour. SMASO often deal with complaints passed to them by the Sheriff Principal. Put your complaint in writing and include details of the sheriff officer and who employed them. Including any evidence you have to support the complaint. If the sheriff officer is found guilty or admits the offence then they could be suspended, deprived of office or fined. SMASO has no disciplinary powers over its members. Those powers lie with the relevant Sheriff Principal or the Lord President.

Can a sheriff officer send me to prison for not paying my debt?

When a creditor takes action against you through the sheriff court, they may use sheriff officers to help with the diligence process. Diligence is the term used to describe the different types of enforcement action that a creditor can take against you. For most types of debt, you cannot be sent to prison if you do not pay. For example, if you fall behind with payments on your credit agreements, the creditor or a sheriff officer cannot send you to prison even if they make a claim through the sheriff court against you. However, if you have a court fine and do not pay, you could be sent to prison as a last resort.

How can I complain about a debt collection agency?

Every debt collection agency (DCA) should hold a consumer credit licence to do their job. This means that they must follow the Financial Conduct Authority's rules and guidance for debt collection set out in their Consumer Credit sourcebook (CONC). If the DCA you are dealing with breaks these rules or guidelines, you can complain. You can complain to the Financial Conduct Authority (FCA), but the FCA cannot deal with your individual case. However, they can gather evidence about how the DCA behaves and may take this into account when deciding whether to renew their licence. Most DCAs are a member of a trade association, which is usually the Credit Services Association (CSA). The trade association will usually have a set of guidelines about how they expect their members to behave. If you complain to the DCA and are not happy with their response, you can complain to the trade association.