Time to read: 5 minutes 50 seconds

If you’ve been struggling to pay your debts, you may be wondering how long it will be before your creditors start to take more serious steps to recover the debt; and what this would look like.

Step 1 – Default Notice

If you are behind on payments to a creditor, they may send you a “Default Notice”. This is normally sent when you’ve missed or paid less than the full amount due for 3 to 6 months. The default notice is a letter and will have the heading “Default notice served under section 87(1) Consumer Credit Act 1974”. It is a formal notification from your creditor that you are in breach of your agreement with them.

It is a legal requirement for your creditor to send you this notice before taking any enforcement action against you and it must explain:

  1. The type of agreement you have and how you have broken that agreement.
  2. The sum you need to pay by a certain date to remedy the broken agreement.
  3. What action the lender intends to take if you don’t take the required steps to fix the broken agreement. This might include asking debt collectors to step in or starting court action against you.

The default notice must give you at least 14 days to carry out the required action on the account. If you pay what’s required within the stated time, your account will carry on as normal and your creditor cannot take any legal action against you. If not, your account will Default.

Step 2 – Default

A Default is a specific term that is added to your credit file to show that you have broken the terms and conditions of your credit agreement. A default will remain on your credit file for 6 years. If you apply for credit whilst the default is on your file, creditors will see this information and as a result you will likely find it harder to gain new credit. An account can only default once, but after this happens, it’s usually the first step in that creditor being able to take legal action to collect the debt.

Step 3 – Decree

Once your account is formally in Default, your creditor can ask the Sheriff Court to make a formal order that you must pay what is owed to the creditor. This legal confirmation in Scotland is called a Decree.

Alternatively, your local council or HMRC can issue you a Summary Warrant for payment of the debt. A Summary Warrant is a type of court order, but unlike a decree, it can be granted without the need for a court hearing. It is most commonly issued for arrears of council tax or income tax.

Step 4 – Charge for Payment

Once a Decree has been granted or Summary Warrant issued, it’s then possible the creditor will arrange for you to be served with a Charge for Payment if the debt remains unpaid. The Charge for Payment will be delivered to you by a Sheriff Officer.

The Charge for Payment will require you to repay your debt to the creditor in full, not just the missed repayments.
You will have 14 days to repay the debt (you can apply for more time to pay using this form).

Step 6 – Bankruptcy Petition

If you fail to repay the debt within 14 days, the Charge for Payment will “expire” and this constitutes “Apparent Insolvency”. This is the legal term in Scotland which describes when someone has failed to repay their debts and one of their creditors has taken legal action against them.

If the sum owed (including any fees, interest or charges added to the original debt) is at least £5,000, a creditor can then ask the court to make you bankrupt, nominating either an Insolvency Practitioner or the Accountant in Bankruptcy to act as a Trustee.

How to retake control

If any of the above steps or scenarios look familiar, you may be on the path to Bankruptcy. Fortunately, there are ways to retake control of your finances and repay your debts on your own terms.

If you are in a debt spiral and can’t see a way to repay your debts, a formal debt solution could help you:

  • lower your monthly repayments to an affordable level,
  • freeze interest and charges, and
  • potentially write off unaffordable debt.

Contact our team of expert debt advisers today for a confidential, no obligation consultation on 0141 648 4320 or complete our Get Started form.