If two people jointly enter into a credit agreement, they are both liable for the
whole amount of the debt. This is known as 'joint and several liability'. For an
agreement to be joint and several, it must be signed by all parties in the form
required by the Consumer Credit Act. So, if you have not signed such an agreement,
you are not liable for your partner's debts.
However, joint and several liability can also apply to rent arrears on joint tenancies,
or arrears on joint mortgages, to council tax payments for couples and to water/sewerage
charges on properties which are jointly occupied. You need to talk to the individual
creditor to obtain a clear understanding
of the liability for the debt.
Any debts become the liability of your estate. If there were sufficient assets in
your estate to settle your debts then this would be done by the executors.
creditors may sometimes attempt to claim payment from a partner or relative
of the deceased, particularly if they lived with them, but if the estate cannot
settle the debts, partners or relatives are not obliged to do so.
There are several possible exceptions to this rule:
- Debts for which someone had joint and several liability with the deceased.
- A mortgage remains on a property even if this passes to a new owner by inheritance
(although it may be paid off by an insurance policy at death).
- Taking over tenancy from the deceased by succession, which may involve taking over
rent arrears if these cannot be paid by the estate. A tenant by succession can lose
their home if the arrears are not paid.
- For married couples, there is joint liability for council tax. Although liability
ceases at the date of death, the surviving partner remains jointly liable for any
arrears. Local authorities have the usual powers to pursue a surviving partner,
but in practice they will not normally seek repayment of community charge arrears
from the surviving partner unless s/he has inherited money from the deceased.
It is always worth checking to see if there is payment protection or other insurance
in place to clear the debts on death.
If you are behind with the payments you agreed when you first took out a credit
agreement, even if you are making reduced payments, your
creditor can take you to Court by issuing a Sheriff Court Citation. The
cost of any resulting Court action will be added to the amount you already owe.
The creditor must formally let you know you
are in default by issuing a Default Notice, before commencing
Court proceedings.
This information relates to the procedure in Scotland. For residents of England
and Wales, please click here for information
on English debt law.
If you receive a Sheriff Court citation you do not need to attend Court but you
do need to reply to all correspondence within the specified timescales to ensure
the Court takes your situation and views into consideration.
The citation will arrive by post, together with a 'Time to Pay Direction'.
Complete the 'Time to Pay Direction' form with details of your offer of payment
and return to the court within the 21 days (see date on form).
The amount you offer should be the same as if Court action was not being taken.
Do not feel pressured into offering to pay more than you can
afford.
Return the completed form to the address of the Sheriff Court. If the court accepts
your offer, the Decree with time to pay will be granted. This means that no further
action can be taken as long as the payments are maintained.
Note, when the decree is issued the creditor may also apply for an Inhibition Order
against any heritable property owned by you. This prevents you disposing of that property
or using it in any way that is contrary to the interest of the creditor. It means that
the unsecured debt is effectively secured against that property and the creditor will
gain first call on the proceeds of any future sale of that property after any mortgage
or secured loan is paid.
At this stage it is also possible for the creditor to pursue Arrestment. This is a non
earnings arrestment and is usually used to arrest money that you may have in a bank or
building society account at the time.
If you miss two payments under a decree, on the date that the third becomes due, the
Time to Pay Direction breaks down and the creditor
can take further enforcement action by applying for a Charge for Payment.
The Charge for Payment is your last chance to pay the debt in full. If you are unable to
do this within 14 days, the Charge for Payment is said to expire which then allows the
creditor to pursue one of the following diligences (formal debt enforcements):
- Wage Arrestment, to take payments direct from your salary.
This will involve your employer.
- Attachment of goods outside your home e.g. car, in garage or driveway.
- Exceptional attachment, which would allow a Sheriff Officer entry to your home to remove
and sell your goods at auction.
- Apply for your bankruptcy
A creditor CANNOT take the above enforcement action without first obtaining a Decree and
issuing a Charge for Payment.
IF YOU WANT TO DEFEND THE CLAIM:
Complete the 'deny the claim - intention to appear' form with details of your reasons for
disputing the claim. Return the completed form to the Court. Follow the instructions on the
form to the letter and if possible get some representation. You must attend the hearing
even if you do not have a representative.
The 'Time to Pay Order' is used after Decree has been granted, you can apply
for this when diligence has begun i.e. a charge has been served. Orders are
like 'Time to Pay Directions' they stop any further action - they are not available
for debts over £10,000 or Council Tax arrears.
However, a 'Time to Pay Order' would be inappropriate if a 'Time to Pay Direction'
was granted and has defaulted. As the majority of people will not have responded
to the initial action then a 'Time to Pay Order' may then be used.
If the creditor does not object to the payment
offer made then the Sheriff will grant a 'Time to Pay Order'. If the
creditor objects, a date for a hearing will be given.
The benefits of applying for a 'Time to Pay Order' is that it can prevent pressure
from creditors to pay an amount that is too
high.
If you are unable to pay the amount ordered by the Court, due perhaps to a change
in circumstances you can apply to the Sheriff to grant smaller instalments - this
is called a 'Variation of a Time to Pay Order'. However this option is also available
to your creditors who can apply to increase the
payment, if realistic.
In Scotland there is no fee payable for any of the 'Time to
Pay' forms.
ARRESTMENTS
There are two common forms of arrestment :
Arrestment of bank/building society accounts.
Arrestment against earnings.
If a creditor does not know where the account
is held then it is served on the head offices of the major Banks and Building societies.
A copy could also be sent to the branch where the account is held, this prevents
any monies being available as the account is then frozen. Either a mandate to authorise
the funds to be released is signed or the creditor raises through the court, an
action of furthcoming which is used to force the funds release - expenses
could be awarded to the creditor.
There are three forms of Arrestment against earnings
:
Earnings Arrestment is used mainly to enforce any
kind of debt including council tax arrears, consumer credit debts, arrears of spousal
maintenance and damages awards. An Arrestment is used to force payment of
a debt, it recovers the amount outstanding plus any interest and expenses due by
either a Decree or a Summary Warrant. The Arrestment is served on the employer
of the debtor with an
arrestment schedule this states:
The name, designation & address of the creditor
Details of the Decree i.e. when it was issued
The date any charge for payment was served
The amount outstanding and the calculation details
Current Maintenance Arrestment as the name suggests
is for current spousal maintenance.
Conjoined Arrestment, where an
Arrestment is already in operation an employer should return the new
arrestment to the sheriff court. The second
creditor must apply to the court for a "Conjoined
Arrestment Order" if successful this means that a percentage
of the amount arrested wil be sent to the second
creditor. If a third creditor enters the amount is split
three ways and so on. The split is on a pro rata basis.
Decrees' are recorded on the Credit Reference Files maintained by Credit Reference
Agencies. The entry on your file may affect your ability to obtain further credit
as most lenders check the file to help them decide whether or not to grant credit.
creditors record only factual information
on individuals such as missed or reduced payments and the general 'blacklisting'
of families or addresses is a misconception.
You can obtain a copy of your credit file by contacting the credit reference bureaux
direct. There is a small fee for this information. Click on one of the links below
for more information:
www.uk.experian.com
www.equifax.co.uk
www.callcredit.co.uk
If you do not make payments under a Decree, the
creditor can apply for:
- A Wage Arrestment - so that a sum can be deducted
from your pay before you receive it
- An Inhibition - so that that the debt can be
secured against your home/property
However, a creditor cannot take any enforcement
action without first obtaining a Decree. So it is essential that you respond to
Summons Forms with an offer that you can afford to maintain.