This information applies to Scotland only

• How to deal with your creditors
• What are non-priority debts
• Making contact with non-priority creditors
• New Code of conduct for lenders
• Working out how to pay back your non-priority creditors
• Making repayment offers to your non-priority creditors
• Creditors won't accept your offer
• You have no money to offer non-priority creditors
• How creditors should treat you
• A creditor takes court action
• Further help and information

How to deal with your creditors

If you're in debt, it's important to keep in contact with the people you owe money to (your creditors). If you're very worried about your debts, don’t be afraid to contact them. If your creditors don't know you're having financial difficulties, they might assume you don't want to pay and start taking action against you.

Before you start contacting your creditors, you'll need to sort out how much money you owe and who you owe it to.

You'll need to sort out which are the most urgent debts to pay and if you've got enough money to do this.

You need to deal with some debts more urgently than others because the consequences of not paying them can be very serious. These are known as priority debts and include things like mortgage and rent. The people you owe this type of debt to are called priority creditors.

To check if you've got enough money to pay off your priority debts, you will need to work out how much money you've got coming into your household (income) and how much you need to spend (expenditure). This is called your budget.

You may also have to deal with any less urgent debts such as credit card debts, overdrafts and other loans. These types of debts are known as non-priority debts.

To find out more about priority debts, see Dealing with priority debts.

On this page, you can find information about how to deal with your non-priority creditors. There is information on:

• the special method for sharing out any spare income fairly between your non-priority creditors, if you have more than one
• how to persuade your non-priority creditors to accept an arrangement to pay back what you owe
• how to persuade your non-priority creditors to give you more time to pay up, if you need it
• what to do if your creditors won't accept your offers to pay or take you to court.

If you don't have enough money to pay off your non-priority creditors, you'll need to think about your options very carefully.

You can find more information about your options if you don't have enough money to pay off your debts in What options are there for dealing with debt.

You may need help to deal with your non-priority creditors.

You can get free help to deal with your creditors from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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What are non-priority debts

Non-priority debts include:

• benefits overpayments
• credit debts such as overdrafts, loans, hire purchase, credit card accounts and catalogues
• student loans
• money borrowed from friends or family.

You can't be sent to prison for not paying non-priority debts. If you don't make any offers to pay, without explaining why, your creditors may take you to court. If you still fail to pay when the court has ordered it, your creditors can take further action. For example, they can get another court order which allows them to arrest your bank account or your wages.

If you don’t keep up payments under a hire purchase agreement, the lender may be able to take back the goods. Depending on how much you have paid, the lender may not need to get a court order first.

For more information about when a lender can repossess goods on hire purchase, see Hire purchase.

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Making contact with non-priority creditors

Don't ignore letters or phone calls from your non-priority creditors. Get in touch with them as soon as possible once you know there are problems paying them. You should do this even if you're not yet in a position to know whether it's possible to pay them back or what arrangements you want to make for paying them back.

If your creditors don't know you're having financial difficulties, they might assume you don't want to pay and start taking action against you.

Write to them to explain why you're in debt, that you're trying to deal with your debts and that you'll contact them again shortly when you're in a position to know how much you can afford to pay.

Ask them if you can stop paying interest on your debts in the meantime. This is called freezing the interest. If you have to carry on paying interest, your debt will just keep on growing. So that you can be prepared ask them if they will put off taking any further action, such as going to court, until you've had time to work out how you are going to deal with your debts.

If the first person you speak to is unhelpful, ask to speak to someone more senior.

Make a note of all telephone calls or meetings. This should include the name of the person you spoke to and what you agreed.

Follow up your phone calls with a letter, confirming what you said and keep copies of your letters. If you need help to write letters go to your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

When you write or speak to your creditors, make sure you explain your situation fully. If they know about your circumstances, they might be prepared to give you extra time to pay.

If you expect things to get easier shortly explain this to your creditors. Your circumstances may be getting easier because:

• you're going back to work
• you're going to get benefits
• you're getting a pay out from a payment protection insurance policy
• you're going to sell some of your belongings to help pay your debts. It may only be worthwhile explaining this to your creditors if you do have something valuable to sell.

For more information about payment protection insurance, see Debt fact sheets.

If you have any written evidence to confirm your situation, you should let your non-priority creditors have a copy. For example, you may have a letter from the Jobcentre Plus confirming that you've been awarded benefits or from an employer showing that you've been offered a job.

If you have debts that you have to pay first, for example, rent arrears or mortgage arrears, if you can, say what you are offering to each of your priority creditors and how long it will take to pay those debts off.

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New Code of Conduct for lenders

Creditors have a voluntary code of conduct. It includes guidance about what they should do if someone is in financial difficulties. It is called the Lending Code and it sets standards for unsecured lending which banks, building societies, credit card companies and other subscribers should follow. The Code covers overdrafts, loans and credit cards. It includes commitments to provide breathing space for those in financial difficulties, and guidance and support for indebted individuals who have mental health problems. Section 9 of the document may be particularly helpful. The document is available on the Lending Standards Board website at www.lendingstandardsboard.org.uk.

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Working out how to pay back your non-priority creditors

To work out whether you've got enough money to pay off your non-priority debts you will need to work out how much money you've got coming into your household and how much you need to spend. This is called your budget.

You will also need to work out whether you've got any priority debts and make sure you've got enough money to pay these off first, before you can deal with your non-priority creditors.

Any money you have left over after paying your expenses and your priority creditors is called your available income. You can use this to pay off your non-priority creditors.

You should share out your available income fairly between all your non-priority creditors. This means you should offer each creditor a percentage of your available income, based on the amount you owe them. These offers are called pro-rata offers.

To work out your pro-rata offers, first of all multiply each individual debt by your available income. Then divide this sum by the total amount you owe to all of your non-priority creditors.

This is the system used by the courts for working out what you can reasonably afford to pay and it is accepted by most creditors.

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Making repayment offers to your non-priority creditors

Once you've worked out how much you can afford to pay your non-priority creditors, you will need to write to each of them. If you can't face doing this yourself you can go to a local Citizens Advice Bureau. Alternatively, you may consider using a company to arrange a Debt Management Plan. For more information about Debt Management Plans see What options are there for dealing with debt.

Send them a copy of your personal budget and a list of your other creditors to show them how you have worked out your offers. Make sure you keep a copy of everything you send to your creditors.

You can use the Budget sheet [ 41 KB] to work out your budget.

Creditors don’t have to accept your offers but will usually consider any reasonable request or offer of repayment that you make.

Sometimes, you need to contact creditors several times before they will agree to what you are asking. If you are having difficulty negotiating with your creditors yourself go to your local Citizens Advice Bureau. Don't forget to take all the paperwork that provides the details of your debts and creditors. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

Creditors often want to look at your offer again after a fixed time, for example six months, to see if your situation has improved.

If creditors won't accept your offer and you can’t persuade them, they may take further action.

It’s important that creditors can see that what you are asking for is reasonable in the circumstances. So make sure you:

• are clear about what you are asking for
• always ask to freeze interest. Unless they freeze interest, your debt will carry on growing even if you are making regular payments
• tell them the regular payment intervals you are able to offer, that is, whether you can pay monthly or weekly
• mention any changes that you know are going to happen which will affect your ability to pay or the amount you are offering.

Keep copies of all your letters to creditors and their replies and a note of any phone calls with them, in case you need them later.

Even if your creditors accept your re-payment plan and you stick to the plan, this won't always stop them taking court action against you. So it's really important that you don't ignore any letters from your creditors, even if you believe you've reached an agreement with them. If a creditor seems to be going back on an agreement, get advice straight away.

You don't have to deal with your non-priority creditors yourself if you don't want to.

You should discuss what to do next with an experienced money adviser. You can get free help to deal with your creditors from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

For more information about other options for dealing with your debts, see What options are there for dealing with debt.

If your circumstances change

If your circumstances change, draw up a new budget and make new offers based on how much you can now afford. Write to all your creditors explaining the reasons for the new offer and send them a copy of your new budget.

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Creditors won't accept your offer

You will sometimes find that creditors won't accept your offers at first.

This may be the case even if you used an advice agency or debt adviser to help you deal with your creditors.

If creditors do not reply to your offers, start paying them what you can afford anyway, and get advice.

For more information about options, see What options are there for dealing with debt.

A creditor may question your budget and claim that you can afford to pay more than you're offering.

In this case, you will have to be prepared to provide proof of your income and expenditure such as:

• wage slips and benefits details
• copies of gas and electricity bills
• details of rent or mortgage payments
• medical evidence that you are off work unwell.

It's also a good idea to include a short explanation in a covering letter to your creditors about why you think the amount you spend on something is reasonable. This will make it easier for creditors to accept your budget.

For more information about when a creditor may question your budget, see How to work out your budget.

If creditors continue to refuse your offers of repayment, don't be tempted to pay back more than you can afford.

Some creditors may try to pressurise you into paying back more or ask you to pay more than you are paying other creditors. If a creditor is acting aggressively or harassing you, this could be a criminal offence. Increasing an offer to one creditor would mean you had less money to pay to the others. If creditors don't think you're treating them all fairly, they can refuse your offer to pay altogether and start court action.

If you find this is happening, or you are having difficulty in dealing with your creditors, get advice. Your local Citizens Advice Bureau can help you deal with difficult creditors. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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You have no money to offer non-priority creditors

After working out your household budget, you may find you have no money left over to pay your non-priority creditors.

You should check whether you can increase your income in any way, for example by claiming a benefit or renting a room in your house. There are tax exemptions on this rental income.

Think about how much you spend on things and whether you can make any cutbacks. If you can make cutbacks, this may make some money available for you to pay back your debts. But be careful about cutting back on essentials such as food and clothing.

For more information about making spending cutbacks and increasing your income, see How to spend less and Increasing your income.

If you can't offer any money to your non-priority creditors, explain why. Ask them if they'll let you stop making payments for three to six months. Say you'll contact them as soon as your situation changes and you're able to start payments again. Or you could try making a token offer of £1.00 a month to all your creditors. Check that you can afford to do this because, if you have a lot of individual debts, offering them even £1.00 each can add up to more than you can manage.

Paying a small amount like a £1.00 is only a short term solution, otherwise it can take years to pay off what you owe. If you don't think your situation is likely to get any better, you will need to consider what to do next very carefully.

You may need to think about options such as bankruptcy or the DAS scheme in Scotland. You may want to get advice from an experienced debt adviser.

For more information about bankruptcy, see What options are there for dealing with debt.

You can get free debt advice from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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How creditors should treat you

When you have fallen into arrears with a loan, creditors are expected to treat you fairly when they are negotiating with you or are trying to collect the arrears.

They are not allowed to intimidate or harass you.

Debt collectors

Many lenders use debt collection companies to collect debts on their behalf because it works out cheaper for them. This is a normal part of the recovery process and you shouldn't worry if you are contacted by a debt collector for money you owe. Debt collectors don't have any extra powers but you may find that they're more persistent.

Don't let debt collectors pressure you into making arrangements you can't keep up. Treat debt collectors in the same way as you would any other creditor. It is a criminal offence for them to harass you.

The Office of Fair Trading (OFT) has produced a leaflet called Been contacted by a debt collector? which gives information about what you should expect from a debt collector and what a debt collector should not do. The leaflet is available on the OFT website at www.oft.gov.uk.

Some debt collectors may pretend to have more legal powers than they really have. For example, they may say that they can take your goods away, when in fact only a sheriff officer can do this and they need to get a court order first.

To find out more about sheriff officers, see Sheriff officers.

If a debt collector does harass you, you should complain to them or to the creditor whose debt they are collecting. If you are still not satisfied or the complaint is not sorted out you can complain to the Office of Fair Trading.

There are other guidelines that debt collectors have to follow. For example, a debt collector must be very careful when dealing with someone who has a physical or mental illness. Lenders should follow a code which includes commitments to provide breathing space for those in financial difficulties, and guidance and support for indebted individuals who have mental health problems.

If debt collectors don't follow the guidelines, action can be taken against them. If you’re being harassed by debt collectors or are unsure what powers they have, get further advice from an experienced adviser.

Discrimination

Creditors and debt collectors are not allowed to discriminate against you because of your age, race, sex, disability, sexuality, or religion. This includes not using language which you find offensive because of your age, race, sex, disability, sexuality or religion.

If you think you aren't being treated fairly by a creditor or debt collector or if they are not keeping to the rules, you should get advice about what to do from an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

Credit card debts

If you have credit card debts and the debt hasn't been passed to a debt collector, you should be allowed a period of grace to agree a repayment plan with a non-profit debt advice agency, such as a Citizens Advice Bureau. This should be a period of at least 30 days. It can be extended to 60 days if you can show that progress on a repayment is being made but you need extra time.

You may also be able to get a 30 day period of grace if your credit card debt has been passed to a debt collection agency. But they must belong to the Credit Services Association (CSA) and you will need to ask for it. During this period, the debt collection agency should not try to contact you in any way.

You can check whether a debt collection agency belongs to the CSA by searching their membership list at www.csaconsumers-uk.com.

A creditor is acting aggressively or harassing you

Creditors are not allowed to intimidate you, harass you or pretend to have more legal powers than they really have.

A creditor who acts aggressively could be an illegal money lender (loan shark). Money lenders must be licensed by the Financial Conduct Authority (FCA). If they are not licensed, they are operating illegally.

Don’t think that a debt is a priority debt just because the creditor is harassing you to pay the debt.

Harassment of people in debt by creditors or their agents is a criminal offence under the Consumer Protection from Unfair Trading Regulations 2008. The regulations prohibit aggressive commercial practices, including aggressive practices used by creditors to pressurise debtors into paying their debts.

For more about harassment by creditors see Harassment by creditors. National Debtline has produced a factsheet for the public about how to deal with harassment by creditors. The factsheet is available on the National Debtline website at www.nationaldebtline.co.uk.

You can find out whether a money lender is licensed by checking the Financial Conduct Authority's Register at www.fca.org.uk.

If you are being harassed by your creditors, get advice about what to do, as the creditor may be committing a criminal offence.

Your local Citizens Advice Bureau can help you if you are being harassed by your creditors. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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A creditor takes court action

If you can't reach an agreement with one of your creditors to pay off your debt, they may take you to court.

Sometimes creditors will take you to court even if you have reached an agreement with them and stuck to it. However, they usually have to send you a written notice first, warning you that they will start court action if you don't settle your debt.

If court action has started, make sure you always reply to letters from the court within the time limit. Get advice if you don't know how to fill in these forms.

If you agree that you owe the amount claimed, fill in the admission form, which you'll get with the other court documents. You'll have to give details of your financial situation. If you've already worked out a budget, you can use this to help you fill out the form. If you've already worked out how much you can afford to pay your creditors, you can offer to make payments for the same amounts.

If your offer is refused or you don't accept that you owe the money, you should get advice from an experienced debt adviser. Check if there is an advice service available in the court.

For more information about what happens when a creditor takes you to court, see What happens if you are taken to court for money you owe.

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Further help and information

Office of Fair Trading (OFT)

The OFT is a government department which oversees trading practices to make sure that they are fair and that customers are protected. The OFT issues licences to traders who give credit, and keeps a register of licensed credit dealers.

The OFT cannot help an individual customer with a consumer problem, but does produce useful leaflets giving information and advice.

You can contact the OFT at:

Fleetbank House
2-6 Salisbury Square
London
EC4Y 8JX

Tel: 0845 722 4499
Fax: 020 7211 8877
E-mail: enquiries@oft.gsi.gov.uk
Website: www.oft.gov.uk

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Citizens Advice