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Debt and Money Advice, Non-Priority Debts· 3 min read

Non-Priority Debt: Unsecured Loans and Credit Cards

Unsecured loans and credit cards are debts that are not tied to your home or another asset. They are usually non-priority debts, but if you stop paying, your creditor can take you to court and your credit rating will be affected. Contact us for free advice.

Unsecured loans and credit cards

If you are struggling to keep up with loan or credit card payments, you are not alone. It is important to know where you stand. These are usually non-priority debts, which means you will not lose your home, go to prison, or lose access to essential services like gas or electricity if you fall behind. But that does not mean they can be ignored.

What is an unsecured loan?

An unsecured loan is money you have borrowed that is not secured against an asset such as your home or car. For example, a personal loan of £5,000 from a bank would be unsecured. If you stop paying, fees and charges may be added, and your credit rating may be affected.

If you default on the loan, your creditor may sell the debt to a debt collection company. They can also take you to the County Court to obtain a County Court Judgment (CCJ) and, if that is not paid, instruct an enforcement agent (bailiff) or carry out an attachment of earnings order to recover the debt from your salary.

Credit cards

If you stop paying your credit card bill, your creditor may add fees and interest, which will affect your credit rating. The debt could be passed to a debt collector. Your lender could also take you to court, which could result in a CCJ and bailiffs being instructed to recover the debt.

The 3 stages of debt recovery

Stage 1: Initial demands (pre-action)

  • Reminders: Phone calls, emails, and letters informing you of the outstanding debt
  • Letter Before Action: A formal letter, often required by the Pre-Action Protocol, detailing the debt amount, interest, and a deadline for payment
  • Mediation: Attempts to reach a settlement before legal action
  • Issuing a claim: If the debt remains unpaid, a claim is filed in the County Court
  • County Court Judgment (CCJ): If you do not respond or admit the debt, a CCJ is issued, making the debt legally enforceable
  • Judgment in default: If you fail to acknowledge or defend the claim within the time limits (usually 14-28 days), a default judgment can be requested

Stage 3: Enforcement

If the CCJ is ignored, the following steps can be taken:

  • Warrant of Control: Bailiffs are sent to seize goods
  • Attachment of Earnings: Money is taken directly from your wages
  • Charging Order: A charge is placed on your property
  • Third-Party Debt Order: Money is taken from your bank account
  • Statutory Demand/Bankruptcy: A demand is served that can lead to insolvency proceedings

If you are being chased for a debt or worried about court action, get in touch. The sooner you contact us, the more we can do to help.

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All our advice is free and confidential. You can also check your options at Citizens Advice or StepChange.

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