As soon as you hear the word court, alarm bells may start to ring. But if the court system is involved in your debt struggles, it’s important to understand the facts and keep a level head.
If you are late on debt payments, your creditors may obtain a County Court Judgment (CCJ) against you. You will need to make repayments directly to your creditor or solicitor to clear your debts.
If you are finding it a struggle to meet the terms of this order and your creditors believe you have funds available, then they can also request for what you owe to be taken directly from you.
There a variety of ways they can go about this and one of these is via a third party debt order.
What is a third party debt order?
When a creditor believes that you are withholding money or are due to receive funds, they may apply for a third party debt order. This allows them to take what they are owed directly from your bank account.
Who can they take money from?
Your creditor will usually try to take money directly from your bank or building society – as this is where your main source of income is paid into.
They can also take money from third parties that are going to pay you lump sums of money. A good example is if you have made an insurance claim, perhaps for compensation for loss of income that could result in a payout. The creditor can get the insurance company to make the payment directly to their account to cover your debts. This means they gain access to your money instantly and that there is no way you can hold any back.
What happens when a creditor applies for a third party debt order?
Your creditor will apply to the courts for an order to obtain information on your financial situation. This means they will be able to see if you have any savings that you are not releasing to them or if you are waiting on a payout (for example an insurance claim).
You may have to attend a court hearing
Once the creditor has applied for an order to obtain information, you may have to attend a court hearing to answer some questions about your personal finances. It’s important you go to this if requested. You will need to prepare a financial statement in time for this court hearing, so the creditor can see whether you can afford to repay your debt.
How to prepare a financial statement
This breakdown of your financial situation is important and you’ll need to go into detail, so plan some time to prepare. Here, we’ve pulled together tables you can use as a template:
When? (Monthly, weekly)
Benefits (e.g. Housing Benefit, Disability Living Allowance, Income Support)
Rent or board (from someone living with you)
When? (Monthly, weekly)
Mortgage or rent
Utilities (gas and electric)
Buildings and contents insurance
TV package (including streaming services such as Netflix and Amazon Prime)
Telephone and broadband
Mobile phone contract
Child support that you pay
Fuel (petrol, diesel)
Public transport (bus, train)
Food shopping (including toiletries and cleaning supplies)
Clothing (including school uniforms)
Entertainment (cinema trips, days out)
Medical (prescriptions, dentist, opticians)
Gym and sports memberships
Debts and court fees
Who are these payable to?
How much do you owe?
Debt repayment amount
Type of debt (secured, unsecured)
Ensure your financial statement includes all the details and is completely honest and accurate. Looking closely at your expenses can also help you work out where you can save money, perhaps by cancelling an unnecessary subscription or changing to a cheaper service provider.
Your bank account will be frozen
There are two steps to a third party debt order being made.
First, the creditor has to apply for an interim third party debt order – this will freeze your bank accounts while your case is being reviewed.
Then it’s up to the judge to decide what happens to the money that has been frozen. They will make a decision at a final hearing which takes place at least 28 days after this interim third party debt order has been made. Your account is frozen to ensure you can’t take any money out in that time. The money is still yours until the judge has made their decision; you simply cannot access it.
What if you can’t pay any bills while the bank account is frozen?
An interim third party debt order can cause problems for a lot of people. You won’t be able to access your money and so may struggle to pay for everyday expenses and bills if you don’t have someone to support you, or to cover the costs of bills while the order is in place. If you are in this situation, you can apply for a hardship payment order.
How to apply for a hardship order
You can do this by filling in an N244 form, which you then take the court, along with written evidence of how you are struggling. We recommend taking evidence of your bank statements, your mortgage details and copies of your wage slips.
You should also notify them if freezing your bank account will affect people who are dependent on you, such as children, a relative with a disability or an elderly person.
It’s worth noting that there is a fee of £255 to apply for a hardship payment order. If you have low income this can be waived but it is at the discretion of the court. If the hardship payment order is agreed, you will have a certain amount of money released to you to use for your expenses.
What if you only have a joint bank account?
If the debt is only in your name, the creditor can’t apply for a third party debt order if your money is in a joint bank account. This is because not all of the money in your account is yours and therefore they cannot make a claim on it.
If the debt is joint with the person you hold a bank account with – then they can apply for a third party debt order.
What happens if the third party debt order is approved and made final?
If the judge agrees to the order, the money will be taken from your bank account and paid directly to the creditor.
Only money that was in the account at the time of the interim third party debt order being made can be used – so if any pay has been credited to your account since that time, then this is yours.
Can you stop a third party debt order from being made?
If you believe the order shouldn’t be made final, after the interim third party debt order has been put in place, then you can appeal against it.
Examples of good reasons for an order to be stopped
- Your account is overdrawn.
- The order will bring hardship upon you or your family members.
- The debt is too small an amount – the judge may not deem the order worthy of being made if the debt isn’t big enough.
- The money you have in your account isn’t yours.
If you decide to appeal against the third party debt order, seek the help of a financial advisor.
Our team of debt advisers are here to answer any questions you may have about your debts. Give them a call on 0808 250 4545 or use our live chat service to speak to an expert instantly.