Legal
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:
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Debts for which someone had
joint and several liability with the deceased.
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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).
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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.
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For married couples, there is joint liability for council tax.
In the event of a spouses death, the surviving partner
remains liable for any arrears.
It is always worth checking to see if there is payment protection or other insurance in place to clear
the debts on death.
This information relates to the procedure in England and Wales. For residents of Scotland, please click here for information on Scottish debt law.
If you receive a County Court Claim Form 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 Claim Form will arrive by post, together with 'Admission' and 'Defence' forms. You should complete and return one of these forms within 14 days.
IF YOU AGREE THAT YOU OWE THE MONEY (known as 'Admitting the claim'):
Complete the 'Admission' form with details of your offer of payment. 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 Admission form to the address on the 'Acknowledgement of Service' which accompanied it (not to the Court). If your offer is accepted, the creditor will ask the Court to make a Judgment and the Court will inform you. You will then receive a form marked 'acceptance of offer' showing how much you have to pay and when you have to pay it. If the total owed is less than £5000 then interest will normally have been stopped.
IF YOU WANT TO DISPUTE THE CLAIM (known as 'Defending the claim'):
Complete the 'Defence' form with details of your reasons for disputing the claim. Return the completed form to the Court. If you need longer than 14 days to prepare your defence, complete the 'Acknowledgement of Service' form and send it to Court within 14 days. You will then be allowed a further 14 days to complete and return the 'Defence' form.
A hearing will then be arranged at your local Court.
You must attend the hearing.
If you do not reply to the Claim Form, the creditor will ask the Court to enter 'Judgment in Default'. Since the Court will not have details of your circumstances, it may set a high amount for you to pay. Where the rate of payment has been set without a hearing, then either the creditor or the debtor can apply for re-determination by a District Judge. You must apply within 14 days of the Judgment and no fee is payable.
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 County Court Claim form. 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.
If you can only afford to pay part of the amount ordered by the Court; you can make an 'Application to Vary an Order' using Form N245 which can be obtained from any County Court. Complete form N245 and send it to the Court. There is a fee of £30 which can be waived in cases of hardship.
If you cannot afford to make any payment to the creditor; you can make an 'Application Notice' to have the judgment set aside using form N244 which can be obtained from any County Court. Send the completed form to the Court together with your budget. There is a fee of £60, which can be waived in cases of hardship. The proceedings may be transferred to your local Court and a hearing date will be set.
You must attend the hearing.
County Court Judgments (CCJs) 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 these files 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 one of the credit reference bureaux direct.
There is a small fee for this information. Click on any of the links below to obtain more information.
www.uk.experian.com
www.equifax.co.uk
www.callcredit.co.uk
If you do not make payments under a CCJ, the creditor can apply for:
- A Charging Order - so that the debt can be secured against your home/property
However, a creditor cannot take any enforcement action without first obtaining a CCJ. So it is essential that you respond to Claim Forms with an offer that you can afford to maintain.
Bailiffs are only used as a last resort, they have the right to seize goods to the value of the debt -
plus costs. They will not take basic household goods but they may take your car if it is parked nearby.
You do not have to let the bailiffs in. However, they can legally enter through any open door or window.
They can break in only if:
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They have entered previously for that particular debt or;
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They are recovering debts owed to the State (e.g. Income Tax or VAT)
Even when bailiffs call, it may still be possible to negotiate satisfactory terms for payment with them.
Or you can use Court form N245 to request that the Warrant be suspended and to make an offer that
you can afford (there is a fee of £30 which you can apply to have waived in cases of hardship
using Court form EX160).
Most debts can be pursued for six years, in accordance with the Limitations Act 1980.
If you move abroad, payment of your UK debts will still be pursued by your creditors. If you have
County Court Judgments, these won't be able to be enforced by Bailiffs but your creditors may attempt
to recover the debt via local debt collection agencies. It is unlikely that your creditors will write
off your debts.
Using CCCS will not in itself have any effect on your credit rating. If however you need to make
reduced payments to your creditors, with or without CCCS, then this will affect your credit rating.
Entries on a credit file are usually held for six years and then removed.
Recent years have seen a growing industry in credit repair. Regrettably,
a number of disreputable companies have emerged, playing on the general public's
lack of knowledge and offering to provide services in 'managing' individual's credit.
In many cases, people have paid considerable sums of money to these companies that
advertise removal of CCJs or Judgments legally removed', often to no avail.
For more information about your credit file click on any of the links below.
www.uk.experian.com
www.equifax.co.uk
www.callcredit.co.uk